a Suppose that Kittle Co. is a U.S. based MNC that is considering setting up a subsidiary in Singapore. Kittle would like this subsidiary to produce and will guitars locally in Singapore, and needs assistance with capital budgeting. The duration of this project in four years, with a salvage value of $12,000,000. This salvage Value would be paid by the government in Singapore to Kitle in exchange for ownership of the subsidiary. The expected exchange rate of the Singapore dollar of $0,50 over the life of the project. Kittle managers are worried about the uncertainty of the value of the Singapore dollar. While they expect that the exchange rate will be $0.50, they recognize that this value may fluctuate. Thus, they decide to $$1,000,000 in cash flows per year, while any additional cash flows beyond this threshold would not be hedged. The forward rate that Kittle will use to hedge the S$1,000,000 is $0.48. The following table shows a key subsection of Kittle's capital budgeting analysis that is affected by this hedging strategy, Complete row (190), (195), and (190) of the table, Aling in the hedged, unhedged, and total cash flows to the parent respectively) in sach of the four years Hint: Do not forget to account for the salvage value in year 4. Year Year 2 Year 3 0 Year 1 Complete row (190). (19b), and (190) of the table, filling in the hedond, unhedged, and total cash flows to the parent (respectively) in each of the four years Hint: Do not forget to account for the salvage value in year 4. Year D Year 2 Year 1 S$5,960,000 S$1,000,000 552,960,000 S$3,960,000 S$1,000,000 S$2,960,000 Year 3 559,720,000 S$1.000.000 558,720,000 16. S$ Remitted After Tax Withholdings 16a. Hedged Alter-Tax 5% Cashflows 16. Unhedged 55 Cashflows (16)-(16a) 17. Salvage Value 18a. Forward Rate on S5 18. Expected Future Spot Rate on SS 19a. Hedged Cash Flows to Parent 196. Unhedged Cash Flow to Parent 19c. Total Cashflow to Parent $0.48 $0.48 50.48 $0.50 $0.50 $0.50 5 and (190) of the table, filing in the hedged, unhedged, and total cash flows to the parent (respectively) in each of the four sunt for the salvage value in year 4. Year 0 x Withholdings is Cashflows flows (16)-(150) Year 1 S$3,960,000 5$1,000,000 S$2,960,000 Year 2 S$3,960,000 S$1,000,000 S$2.960,000 Year 3 $$9,720,000 S$1,000,000 S$8,720,000 Year 4 S$9,000,000 S$1,000,000 558,000,000 S$12,000,000 $0.48 $0.48 sot Rate on SS ito Parent 50.50 $0.50 $0.48 $0.50 $0:48 $0.50 $ w to Parent arent $