Mehra ( 1978), Solnik ( 1974), Sercu ( 1980) and Stulz ( 1995) suggested different models, which have been discussed in the following from a conceptual perspective (see for example Ruiz de Vargas and Breuer 2018, 2019) while e.g. Numerous papers have analyzed the risk-return relationship based on the capital asset pricing model (CAPM). The interface between these two streams of the literature, the cross-border valuation of companies, has been analyzed extensively when it comes to the expected rate of returns for shareholders (cost of equity). The textbooks of Sercu ( 2009) and Bekaert and Hodrick ( 2018) provide a good overview and a thorough analysis of this field. For example, forecasting and hedging flexible exchange rates, international parity theories, the properties of international capital markets, or the pricing of assets in these markets has been of interest to researchers over decades. Of course, this is also true for the literature on international financial theory. Key contributions to discounted cash flow (DCF) valuation were made by Modigliani and Miller ( 1958, 1963), Miles and Ezzell ( 1980), Harris and Pringle ( 1985) and Inselbag and Kaufold ( 1997). The literature on company valuation is vast. The paper addresses not only the valuation of a foreign company, but also the valuation of a domestic company that generates cash flows in foreign currency and/or uses debt in foreign currency. In addition, we derive the RADR to be used in the flow to equity and weighted average cost of capital approach. We assume deterministic debt and apply the adjusted present value approach. We discuss the consequences of assuming the uncovered interest parity to hold. It also derives the discount rates if forward exchange rates are applied. The paper shows how a valuation can be implemented with or without consideration of covariances between cash flows and rate of returns with exchange rates. A conceptual choice occurs not only between the foreign currency and the home currency approach, but also regarding the estimation of future exchange rates. Risk discounts from cash flows and risk premia to be added to risk-free interest rates are derived according to the global capital asset pricing model. Additional tax effects beyond the well-known tax shield on interest expenses must be considered. Relevant risks are exchange rate risk, business risk, financial risk, the risk of the tax effects induced by debt financing, and the risk of default. on the derivation of the risk-adjusted rate of return. We build upon well-known fundamentals and relevant contributions, e.g. Although the literature on company valuation and on international financial management is vast, such a framework has not yet been proposed. The paper seeks to develop a comprehensive framework to cross-border discounted cash flow valuation.
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