1.In year-three, Nico International has a plan to expand the business in China, India and Malaysia. Consequently, it forecasts an 9.42 per cent increase in year-one earnings of its subsidiaries in year-three. Perth International anticipates 3.48 per cent, 7.52 per cent, 11.01 per cent and 9.75 per cent inflation in Australia, China, Indian and Malaysia, respectively, in year-three. It considers the Purchasing power parity to calculate the value of CNY, INR and MYR against the Australian dollar in year-three using the year-two exchange rates A$/CNY, A$/INR, and A$/MYR.

Note that investment of subsidiaries in year-two will be matured in this year and include these investment proceeds to the year-three cash flow. It means each subsidiarys year-three cashflow is year-three earnings and year-two investment proceeds.

What is the total Australian dollar (A$) cash flow for year-three?

2.Berger International Co., an Australian multinational company, forecasts 61 million Australian dollars (A$) earnings next year (i.e., year-one). It expects 53 million Chinese yuan (CNY), 47 million Indian rupees (INR), and 35 million Malaysian ringgit (MYR) proceeds of its three subsidiaries in year-one. It also forecasts the year-one exchange rates A$0.3590/CNY, A$0.0487/INR, and A$0.5808/MYR.

Calculate the total Australian dollar (A$) cash flow for year-one.

3.In year-three, Perth International has a plan to expand the business in China, India, and Malaysia. Consequently, it forecasts a 9.42 per cent increase in year-one earnings of its subsidiaries in year-three. Perth International anticipates 3.48 percent, 7.52 percent, 11.01 percent, and 9.75 percent inflation in Australia, China, Indian and Malaysia, respectively, in year-three. It considers the Purchasing power parity to calculate the value of CNY, INR, and MYR against the Australian dollar in year-three using the year-two exchange rates A$/CNY, A$/INR, and A$/MYR.

Note that investment of subsidiaries in year-two will be matured in this year and include these investment proceeds to the year-three cash flow. It means each subsidiarys year-three cashflow is year-three earnings and year-two investment proceeds.

What is the total Australian dollar (A$) cash flow for year-three?

4.The subsidiaries of Perth International remit their earnings and investment proceeds to the Australian parent at the end of each year. The annual weighted average cost of capital or required rate of return of Perth International is 6.83 percent.

Calculate the current value of the Perth International Co. using its expected cash flows in year-one, year-two and year-three