Foreign Investment Decision December 19, 2006

Essay by mamalayneUniversity, Bachelor'sB+, August 2008

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IntroductionIn this paper we will analyze information about Brazil and India. The approach we will take is that of a manufacturing organization considering expansion into these regions. We will then discuss the choice which was made regarding what country would be the best option for our company to expand in. Next we will identify the differences within each country's currency and exchange rates as well as their overall stability. We will use foreign exchange and cost of capital data in order to determine the appropriate capital sources. We will evaluate the information obtained from our sensitivity analysis and answer a variety of what if scenarios to reiterate our choice position. We will include information about alternative investment and financing decisions that may change our position. We can utilize the tools of the capital budgeting technique, in order to justify our choices. During this evaluation we will develop a contingency plan based upon the identified changing global risk factors.

Then finally summarize our decisions.

Country of ChoiceIndia's economy is one of the fastest growing economies in the world. Many corporations have entered the Indian market by outsourcing jobs, which in turn have helped the economy. The economy has posted an average growth rate of more than 7% in the decade since 1994, reducing poverty by about 10 percentage points. India achieved 7.6% GDP growth in 2005, significantly expanding manufacturing.

The recent economic developments have primarily helped upper and middle-class Indians. Poverty in India has reduced significantly, 22% of Indians still live below the poverty level. Since 1950, governments have implemented various schemes, under planning, to alleviate poverty.

Corruption has been one of the main problems affecting India. It takes the form of bribes, evasion of tax and exchange controls, and embezzlement. The economic reforms of 1991 reduced the red tape, bureaucracy...