ABSTRACT
One common circumstance in international investment is the consideration of replacing old equipment. To pick up the surrogate machine, the international executive often has to choose from a variety of options offering different replacement costs and distinct life spans. This chapter provides the executive of a multinational corporation with the conceptual tools required to rank the replacement cost of new equipment, new investment opportunities, alternative financing schemes, and the market value of a group of subsidiaries. The first step in the accomplishment of the proposed goal is to introduce the perpetuity and annuity concepts. In theory, perpetuity refers to a financial instrument that offers to pay to its holder a fixed income each year, forever. An annuity is an asset that pays a fixed amount of money each time period for a specified number of terms. Car loans are a typical example of an annuity.
