Finance Discussion Question

The Sarbanes-Oxley Act requires that the CEO vouch for financial statements and that board of directors has audit committees drawn from independent directors in addition, the law prohibits companies to make loans to corporate directors. Sarbanes-Oxley is such a problem for foreign companies because the required practices are in conflict with practice and custom in many countries. For example, Independent audit committees are almost unheard of at many European and Asian companies.

1. Why might compliance with Sarbanes-Oxley enhance the flow of capital from U.S. investors to international firm's securities?

The intent of the Sarbanes-Oxley Act is to direct the board's actions to the interests of shareholders and access to information would encourage confidence in the intentions of the boards' and managers' to work towards and in the interest of the shareholders. U.S. Financial documents have long been the most robust however, new laws require even more transparency from corporations and this transparency will enhace the flow of capital from U.S. Investors to international firm's securities.

Given that many multinationals based in many countries have much greater sales outside their domestic markets than within them, what is the particular relevance of their domestic currency?

Usually, multinationals based in many countries have shareholders that are domestic and of course they are mainly concerned about their wealth in terms of domestic currency. Although multinational companies have much greater sales outside their domestic markets than within them, they pay dividends in terms of domestic currency so, their sales in terms of domestic currency is extremely relevant

An investment in a foreign subsidiary is estimated to have a positive NPV after the discount rate used in the calculations is adjusted for political risk and any advantages from diversification.  Does that mean the project is acceptable?  Why or why not?

If after the adjustment...