Hello, I was given these four questions, all of which are linked.

I would like to check if my answers are right or am I completely off the mark. My answers are in bold and underlined

Thank you.

Question 1

Perth InternationalCo., an Australian multinational company, forecasts 61 million Australian dollars (A$) earnings next year (i.e., year-one).It expects 58 million Chinese yuan (CNY), 49 million Indian rupees (INR) and 32 million Malaysian ringgit (MYR) proceeds of its three subsidiaries in year-one. It also forecasts the year-one exchange rates A$0.2349/CNY, A$0.0468/INR and A$0.5409/MYR.

Calculate the total Australian dollar (A$) cash flow for year-one. (enter the whole number with no sign or symbol)

Local Business: 61 million AUD

Foreign Business:

Exchange RateAUD Amount

58 mil CNYA$0.2349/CNY58 mil * 0.2349 = 13624200

49 mil INRA$0.0468/INR49 mil * 0.0468 = 2293200

32 mil MYRA$0.5409/MYR32 mil * 0.5409 = 17308800

Total cash flow = 61,000,000 + 13,624,200 + 2,293,200 + 17308800 = A$94226200

Question 2

Perth International anticipates a 5.86 per cent increase in the year-one income of its subsidiaries in year-two. It has information that the current 6.00 per cent, 7.36 per cent, 13.16 per cent and 10.12 per cent nominal interest rate in Australia, China, India and Malaysia, respectively, will remain the same in the next three years. Due to foreign currency higher nominal interest rate, subsidiaries will invest 29 per cent, 56 per cent and 37 per cent of their year-two earnings in China, India and Malaysia, respectively, for next year. Subsidiaries will remit their remaining incomes (i.e., after investment) to the Australian parent.Perth International believes in the Purchasing Power parity with considering a 2.69 per cent real interest in Australia, China, India and Malaysia to calculate the expected foreign currency value against the Australian dollar for year-two based on the year-one exchange rates A$/CNY, A$/INR, and A$/MYR.

What is the total Australian dollar (A$) cash flow for year-two? (enter the whole number with no sign or symbol)

Calculate Yr-2 exchange rates:

Expected inflation rate = Nominal interest rates - Real Interest Rates

Australia (Home): 6% - 2.69% = 3.31%

China (Foreign): 4.36% - 2.69% = 1.67%

India (Foreign): 13.16% - 2.69% = 10.47%

Malaysia (Foreign): 10.12% - 2.69% = 7.43%

Exchange Rates for Yr 2:

Australia, China :

A$0.2349/CNY (Yr-1)

(A$0.2349 x (1 + 0.0331)) / (CNY 1 x (1 + 0.0167)) = 0.238689 A$/CNY (Yr-2)

Australia, India:

A$0.0468/INR

(A$0.0468 x (1 + 0.0331)) / (INR 1 x (1 + 0.1047)) = 0.043767 A$/INR (Yr-2)

Australia, Malaysia:

A$0.5409/MYR

(A$0.5409 x (1 + 0.0331)) / (MYR 1 x (1 + 0.0743)) = 0.520156 A$/MYR (Yr-2)

Anticipates 5.86% increase in Year-1 in come of subsidiaries in Year-2

Subsidiaries earnings and investment amounts for Year 3

China:

58,000,000 x (100% + 5.86%) =61,398,800.00 CNY

Amount Invested for Year-3:

61,398,800.00 x 29% = 17,805,652.00 CNY

Amount Remitted to Parent Company:

61,398,800.00 - 17,805,652.00 = 43,593,148.00 CNY

Apply Exchange Rate

43,593,148.00 CNY x 0.238689 = 10405204.90 AUD

India:

$49,000,000 x (100% + 5.86%) = 51,871,400.00 INR

Amount invested for Year-3:

51,871,400.00 x 56% = 29,047,984.00 INR

Amount Remitted to Parent Company:

51,871,400.00 - 29,047,984.00 = 22,823,416.00 INR

Apply Exchange Rate

22823416 x 0.043767 = 998,912.45 AUD

Malaysia:

$32,000,000 x (100% + 5.86%) = 33,875,200.00 MYR

Amount Invested forYear-3:

$33,875,200.00 x 37% = 12,533,824.00 MYR

Amount Remitted to Parent Company:

33,875,200.00 - 12,533,824.00 = 21,341,376.00 MYR

Apply Exchange Rate

21,341,376.00 x 0.520156 = 11,100,844.77 AUD

Total Cashflow (Assume that local biz is still 61,000,000):

61,000,000 + 10405204.90 + 998,912.45 + 11,100,844.77 = A$83504962

Question 3

In year-three, Perth International has a plan to expand the business in China, India and Malaysia.Consequently, it forecasts an 8.73 per cent increase in year-one earnings of its subsidiaries in year-three. Perth International anticipates 3.74 per cent, 7.25 per cent, 11.27 per cent and 9.11 per cent inflation in Australia, China, Indian and Malaysia, respectively, in year-three. It considers the Purchasing power parity to calculate the value of CNY, INR and MYR against the Australian dollar in year-three using the year-two exchange rates A$/CNY, A$/INR, and A$/MYR.

Note that investment of subsidiaries in year-two will be matured in this year and include these investment proceeds to the year-three cash flow. It means each subsidiary's year-three cashflow is year-three earnings and year-two investment proceeds.

What is the total Australian dollar (A$) cash flow for year-three? (enter the whole number with no sign or symbol)

Anticipated 8.73% increment in year-one earnings of subsidiaries in year-three

China: 58,000,000 x (1 + 8.73%) = 63,063,400 CNY

India: 49,900,000 x (1 + 8.73%) = 53,277,700.00 INR

Malaysia: 32,000,000 x (1 + 8.73%) = 34,793,600.00 MYR

Anticipated inflation in Year-3:

Australia3.74%

China7.25%

India11.27%

Malaysia9.11%

Consider PPP to calculate value of CNY, INR and MYR against AUD in year-3 using year-2 exchange rates A$/CNY, A$/INR and A$/MYR

Year-2 Exchange Rates:New Exchange Rates

0.238689 AUD/CNY(0.238689 x (1+0.0374)) / (1 x (1+0.0725)) = 0.230877 AUD/CNY

0.043767 AUD/INR(0.043767 x (1+0.0374)) / (1 x (1+0.1127)) = 0.040805 AUD/INR

0.520156 AUD/MYR(0.520156 x (1+0.0374)) / (1 x (1+0.0911)) = 0.494556 AUD/MYR

Amount Earned in Year-3 by Subsidiaries converted to AUD

CNY to AUD: 63,063,400 x 0.230877 = 14559889 AUD

INR to AUD: 53,277,700 x 0.040805 = 2173997 AUD

MYR to AUD: 34,793,600 x 0.494556 = 17207383 AUD

Each subsidiary's year-3 cashflow is year-3 earnings + yr-2 investment proceeds

Year-3 cashflows:

61,000,000 + 14,559,889 + 2,173,997 + 17,207,383 = 94,941,269

Year-2 investment proceeds:

17,805,652 + 29,047,984 + 12,533,824 = 59,387,460

Total:

94,941,269 + 59,387,460 = A$154,328,729

Question 4

The subsidiaries of Perth International remit their earnings and investment proceeds to the Australian parent at the end of each year. The annual weighted average cost of capital or required rate of return of Perth International is 7.72 per cent.

Calculate the current value of the Perth International Co. using its expected cash flows in year-one, year-two and year-three. (enter the whole number with no sign or symbol).

Local Business: A$61,000,000 x (1 / 1.0772) = A$56,628,296

Year-1

China: $13,624,200 x (1 / 1.0772) = A$12,647,791

Malaysia: $2,293,200 x (1 / 1.0772) = A$2,128,853

India: $17,308,800 x (1 / 1.0772) = A$16,068,325

Year-2

China: $10,405,208x (1 / 1.0772^2) = A$8,967,226

India: $998,906 x (1 / 1.0772^2) = A$860,859

Malaysia: $11,100,849 x (1 / 1.0772^2) = A$9,566,730

Year-3

China: $14,559,916 x (1 / 1.0772^3) = A$11,648,496

India: $2,173,990 x (1/ 1.0772^3) =$1,739,276

Malaysia: $17,207,383 x (1/ 1.0772^3) =$13,766,571

Total:

$56,628,296 + $12,647,791 + $2,128,853 + $16,068,325 + $8,967,226 + $860,859 + $9,566,730 + $11,648,496 + $1,739,276 + $13,766,571= $134,022,421