4. Natural Mosaic. Natural Mosaic Company (U.S.) is considering investing Rs50,000,000 in India to create a wholly owned tile manufacturing plant to export to the European market. After five years, the subsidiary would be sold to Indian investors for Rs 100,000,000. A pro forma Income statement for the Indian operation predicts the generation of R$7,000,000 of annual cash flow, is listed in the following table. Sales revenue 30,000,000 Less cash operating expenses (17.000.000 Gross income 13,000,000 Loss depreciation expenses (1.000.000 Earnings before interest and the 12,000,000 Loss Indian taxes at 50% (0.000.000 Net Income 8,000,000 Add back dopcion 1.000.000 Annual cash flow 7.000.000 The initial investment will be made on December 31, 2011. and cash flows will occur on December 31st of mach succeeding your Annun canh dividends to Natural Mosaic from India will equal 75% of nocounting Income The U.S. corporate tax rate is 40% and the Indian corporate tax rate is 60%. Because the indian tax rate is great thu the U.S. tax rate, annual dividend paid to Natural Mosaie will not be subject to additional taxon in the United States There are no capital gains taxes on the final al Natural Mosaicuson a waighted average cost of capital of Non domonto investment, but will add percentage points for the Indian investment because of perceived at Natural Mosaic forecasts the nea/dollar exchange rate on December 31st for the next six years as listed below The U.S. corporate tax rate is 40% and the Indian corporate tax rate s 50%. Because the Indian tax rate is greater than the U.S. tax rate, annual dividends paid to Natural Mosaic will not be subject to additional taxes in the United States There are no capital gains taxes on the final sale. Natural Mosaic uses a weighted average cost of capital of 14% on domestic investments, but will add six percentage points for the Indian Investment because of perceived greater risk Natural Mosaic forecasts the rupee/dollar exchange rate on December 31st for the next six years as listed below. RS/S RSS 2011 50 2014 62 2012 2015 58 2013 58 2016 70 What is the net present value and internal rate of return on this investment? 4. Natural Mosaic. Natural Mosaic Company (U.S.) is considering investing Rs50,000,000 in India to create a wholly owned tile manufacturing plant to export to the European market. After five years, the subsidiary would be sold to Indian investors for Rs 100,000,000. A pro forma Income statement for the Indian operation predicts the generation of R$7,000,000 of annual cash flow, is listed in the following table. Sales revenue 30,000,000 Less cash operating expenses (17.000.000 Gross income 13,000,000 Loss depreciation expenses (1.000.000 Earnings before interest and the 12,000,000 Loss Indian taxes at 50% (0.000.000 Net Income 8,000,000 Add back dopcion 1.000.000 Annual cash flow 7.000.000 The initial investment will be made on December 31, 2011. and cash flows will occur on December 31st of mach succeeding your Annun canh dividends to Natural Mosaic from India will equal 75% of nocounting Income The U.S. corporate tax rate is 40% and the Indian corporate tax rate is 60%. Because the indian tax rate is great thu the U.S. tax rate, annual dividend paid to Natural Mosaie will not be subject to additional taxon in the United States There are no capital gains taxes on the final al Natural Mosaicuson a waighted average cost of capital of Non domonto investment, but will add percentage points for the Indian investment because of perceived at Natural Mosaic forecasts the nea/dollar exchange rate on December 31st for the next six years as listed below The U.S. corporate tax rate is 40% and the Indian corporate tax rate s 50%. Because the Indian tax rate is greater than the U.S. tax rate, annual dividends paid to Natural Mosaic will not be subject to additional taxes in the United States There are no capital gains taxes on the final sale. Natural Mosaic uses a weighted average cost of capital of 14% on domestic investments, but will add six percentage points for the Indian Investment because of perceived greater risk Natural Mosaic forecasts the rupee/dollar exchange rate on December 31st for the next six years as listed below. RS/S RSS 2011 50 2014 62 2012 2015 58 2013 58 2016 70 What is the net present value and internal rate of return on this investment
