Question
A Brazilian subsidiary is remitting CFs to its parent company in the U.S. After withholding tax, the CFs amount to Y1: R$ 120,000 Y2: R$
A Brazilian subsidiary is remitting CFs to its parent company in the U.S. After withholding tax, the CFs amount to
Y1: R$ 120,000
Y2: R$ 150,000
Y3: R$ 200,000
The exchange rate for year 1 is projected to be $ 0.7 / R$, $ 0.66 / R$ for year 2, and $0.62 / R$ for year 3. You have decided to hedge R$ 100,000 each year with forward contracts and forward rate of $ 0.66/ R$.
What is the sum of the present value of these cash flows in dollars, if the required rate of return is 12%?
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The Handbook For Investment Committee Members
Authors: Russell L. Olson
1st Edition
0471719781, 978-0471719786
