Answered step by step
Verified Expert Solution
Question
1 Approved Answer
a ) Perth International Co . , an Australian multinational company, forecasts 6 5 million Australian dollars ( A$ ) earnings each year in the
a Perth International Co an Australian multinational company, forecasts million Australian dollars A$ earnings each year in the next three years. It expects million Chinese yuan CNY million Indian rupees INR and million Malaysian ringgit MYR proceeds from its three subsidiaries in year one. It also forecasts the yearone exchange rates A$CNY A$INR and A$MYR
Calculate the total Australian dollar A$ cash flow for year one. enter the whole number with no sign or symbol
b Perth International anticipates a per cent increase in the yearone income of its subsidiaries in yeartwo. It has information that the current per cent, per cent, per cent and per cent nominal interest rate in Australia, China, India and Malaysia, respectively, will remain the same in the next three years. Due to foreign currency higher nominal interest rate, subsidiaries will invest per cent, per cent and per cent of their yeartwo earnings in China, India and Malaysia, respectively, for next year. Subsidiaries will remit their remaining incomes ie after investment to the Australian parent. Perth International believes in the Purchasing Power Parity with considering a per cent real interest in Australia, China, India and Malaysia to calculate the expected foreign currency value against the Australian dollar for yeartwo based on the yearone exchange rates A$CNY A$INR and A$MYR
What is the total Australian dollar A$ cash flow for yeartwo? enter the whole number with no sign or symbol
c In yearthree, Perth International has a plan to expand the business in China, India and Malaysia. Consequently, it forecasts an per cent increase in yearone earnings of its subsidiaries in yearthree. Perth International anticipates per cent, per cent, per cent and per nominal interest rate in Australia, China, Indian and Malaysia, respectively, in yearthree. It considers the International Fisher Effects to calculate the value of CNY INR and MYR against the Australian dollar in yearthree using the yeartwo exchange rates A$CNY A$INR and A$MYR
What is the total Australian dollar A$ cash flow for yearthree? enter the whole number with no sign or symbol
d 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 per cent.
Calculate the current value of the Perth International Co using its expected cash flows in yearone, yeartwo and yearthree. enter the whole number with no sign or symbol
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started