Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

ASAP HELP NEEDED!!!! EXPLAIN STEP BY STEP !! DETAILED PLEASE ________________________________________________ Finisterra, S.A., located in the state of Baja California, Mexico, manufactures frozen Mexican food,

ASAP HELP NEEDED!!!! EXPLAIN STEP BY STEP !! DETAILED PLEASE

________________________________________________

Finisterra, S.A., located in the state of Baja California, Mexico, manufactures frozen Mexican food, which enjoys a large following in the U.S. states of California and Arizona to the north. In order to be closer to its U.S. market, Finisterra is considering moving some of its manufacturing operations to southern California. Operations in California would begin in year 1 and have the following attributes.

image text in transcribed

image text in transcribed

The operations in California will pay 80% of their accounting profit to Finisterra as an annual cash dividend. Mexican taxes are calculated on grossedup dividends from foreign countries, with a credit for host-country taxes already paid. What is the maximum U.S. dollar price Finisterra should offer in year 1 for the investment?

Assumptions Sales price per unit, year 1 (US$) Sales price increase, per year Initial sales volume, year 1, units Sales volume increase, per year Production costs per unit, year 1 Production cost per unit increase, per year General and administrative expenses, per year Depreciation expenses, per year Finisterra's WACC (pesos) Value $5.00 3.00% 1,000,000 10.00% $ 4.00 4.00% $100,000 $ 80,000 16.00% Assumptions Terminal value discount rate Spot exchange rate (Ps/$) Year 0 Spot exchange rate (Ps/$) Year 1 Spot exchange rate (Ps/$) Year 2 Spot exchange rate (Ps/$) Year 3 Value 20.00% 8.00 9.00 10.00 11.00

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The F And I Revolution Finance Reimagined

Authors: Michael A Bennett

1st Edition

1507777221, 978-1507777220

More Books

Students also viewed these Finance questions