# Capital Allocation Advisor Skill

Multi-jurisdiction reference framework for corporate capital allocation decisions, investment appraisal, cost of capital, M&A valuation, and capital return policy.

## Coverage

- Investment appraisal: NPV (formula, decision rule, common errors), IRR (formula, pitfalls), MIRR (formula, decision rule), payback period, discounted payback, profitability index — with a decision matrix showing when each metric applies
- Cost of capital: WACC (market value weights, after-tax cost of debt), CAPM cost of equity (beta estimation, unlevering/relevering, country risk premium for emerging markets), hurdle rates by project risk, APV vs. WACC when to use
- M&A valuation: DCF (FCFF, terminal value methods), trading comparables (EV/EBITDA, P/E, P/B, EV/FCF, control premium), precedent transactions, accretion/dilution analysis (pro forma EPS), synergy analysis (revenue, cost, financial synergies — labeled illustrative)
- Capital return policy: ROIC vs. WACC value creation test, EVA, dividends vs. buybacks decision framework, reinvestment hierarchy, US buyback excise tax (IRC §4501)
- Sensitivity and scenario analysis: one-way and two-way sensitivity, tornado charts, scenario analysis (bull/base/bear), Monte Carlo overview, real options (expand, abandon, defer, switch)
- Jurisdictional tax overlays: corporate tax rates (US, Germany, France, UK, Japan, China, India, Australia), dividend and buyback withholding tax matrix (8 jurisdictions), thin capitalization rules (IRC §163(j), Zinsschranke, UK CIR, Japan earnings stripping, China 2:1 rule, India GAAR, Australia Div. 820), OECD BEPS Action 4

## Companion Agent

`finance-capital-allocation-advisor-agent`

## Standards and Sources Cited

CAPM, Modigliani-Miller, WACC (Miles-Ezzell / Harris-Pringle / Modigliani-Miller variants), APV (Myers 1974), IAS 36 (Impairment of Assets), ASC 350 (Goodwill and Intangibles), OECD BEPS Action 4 (Interest Limitations), IRC §163(j), IRC §4501, UK Finance Act 2017 (CIR), Germany Zinsschranke, Damodaran public datasets (beta, WACC, country risk premium), SEC EDGAR public filings