Finisterra, S.A. 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 assumptions: The operations in California will pay 83% of its accounting profit to Finisterra as an annual cash dividend. Mexican taxes are calculated on grossed up 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? Calculate the cash flow in year 1 below: (Round to the nearest whole number. The sales price and cost per unit must be rounded to the nearest cent.) Operating profit before taxes Less U.S. corporate income taxes (39\%) Net income Dividends distributed (\$) ( 83% of net income) Exchange rate (Ps/\$) 7.008.009.00 Dividends remitted to parent (pesos) PS Additional taxes due in Mexico Dividends received, after-tax (pesos) \begin{tabular}{lll} & 0 & 0 \\ \hline Ps & & 0 \\ \hline \end{tabular} Terminal value (\$) (discounted at 20.20% ) (dividend in year 4/0.202 ) Terminal value (pesos) Total cash flow for discounting (pesos) Ps \begin{tabular}{lr} Assumptions & \multicolumn{1}{c}{ Value } \\ \hline Sales price per unit, year 1 (US\$) & $5.00 \\ Sales price increase, per year & 2.00% \\ Initial sales volume, year 1, units & 1,300,000 \\ Sales volume increase, per year & 1.00% \\ Production costs per unit, year 1 & $4.00 \\ Production cost per unit increase, per year & 4.00% \\ General and administrative expenses per year & $140,000 \\ Depreciation expenses, per year & $82,000 \\ Spot exchange rate (Peso = US\$1.00) Year 0: 6.00 Year 1:7.00 \\ Year 2: 8.00 Year 3: 9.00 & \\ Finisterra's WACC (pesos) & 15.50% \\ Terminal value discount rate & 20.20% \end{tabular} Finisterra, S.A. 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 assumptions: The operations in California will pay 83% of its accounting profit to Finisterra as an annual cash dividend. Mexican taxes are calculated on grossed up 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? Calculate the cash flow in year 1 below: (Round to the nearest whole number. The sales price and cost per unit must be rounded to the nearest cent.) Operating profit before taxes Less U.S. corporate income taxes (39\%) Net income Dividends distributed (\$) ( 83% of net income) Exchange rate (Ps/\$) 7.008.009.00 Dividends remitted to parent (pesos) PS Additional taxes due in Mexico Dividends received, after-tax (pesos) \begin{tabular}{lll} & 0 & 0 \\ \hline Ps & & 0 \\ \hline \end{tabular} Terminal value (\$) (discounted at 20.20% ) (dividend in year 4/0.202 ) Terminal value (pesos) Total cash flow for discounting (pesos) Ps \begin{tabular}{lr} Assumptions & \multicolumn{1}{c}{ Value } \\ \hline Sales price per unit, year 1 (US\$) & $5.00 \\ Sales price increase, per year & 2.00% \\ Initial sales volume, year 1, units & 1,300,000 \\ Sales volume increase, per year & 1.00% \\ Production costs per unit, year 1 & $4.00 \\ Production cost per unit increase, per year & 4.00% \\ General and administrative expenses per year & $140,000 \\ Depreciation expenses, per year & $82,000 \\ Spot exchange rate (Peso = US\$1.00) Year 0: 6.00 Year 1:7.00 \\ Year 2: 8.00 Year 3: 9.00 & \\ Finisterra's WACC (pesos) & 15.50% \\ Terminal value discount rate & 20.20% \end{tabular}