Foreign Investment Analysis
Sevall Inc's Mexican Subsidiary, Cancunrocks, is expected to pay Sevall 1 Peso per share in 1 year after all foreign and US taxes have been accounted for.
The exchange rate in 1 year is expected to be $0.10 dollars per peso. After this, the peso is expected to depreciate against the dollar by 2% forever due to
inflation differences between the US and Mexico.
The peso denominated dividend is expected to grow at 7% a year indefinitely.
Sevall owns 10M shares of Cancunrocks.
Assuming that the cost of equity is 12%, what is the valuation of Cancunrocks in US dollars?