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Dick Smith Foods. is a U . S . company that is considering expanding its operations into Japan. The company supplies processed foods to storefront
Dick Smith Foods. is a US company that is considering expanding its operations into Japan. The company supplies processed foods to storefront delicatessens in large cities. This requires Dick Smith Foods to have a centralized production and warehousing facility in each of these cities. Dick Smith Foods has located a possible site for a Japanese subsidiary in Tokyo. The cost to purchase and equip the facility is Perform an NPV analysis to determine whether this is a good investment, under the following assumptions:a The average perunit sales price will initially be b Firstyear sales will be million units, and physical sales will then grow at per annum for the next years. c Firstyear variable costs of production will be per unit of labor and $ per unit of imported semifinished goods. Administrative costs will be million. d Retail prices, labor costs, and administrative expenses are expected to rise at the Japanese yen rate of inflation, which is forecast to be Dollar prices of semifinished goods are expected to rise at the US dollar rate of inflation, which is expected to be e The yendollar exchange rate is currently $ and the yen is expected to appreciate at f The Japanese corporate income tax rate is and there is a withholding tax on payments to parent company. g The yendenominated equity discount rate for the project is h All of the Japanese subsidiarys free cash flow will be paid to the parent company.
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