Hermosa Components: Baseline Analysis. Hermosa Beach Components, Inc., of California exports 26,000 sels of low density light bulbs per year to Argentina under an import license that expires in five years. In Argentina, the bulbs are sold for the Argentine peso equivalent of $60 per set Direct manufacturing costs in the United States and shipping together amount to $40 per set. The market for this type of bulb in Argentina is stable, neither growing northrinking, and Hermosa holds the major portion of the market The Argentine government has invited Hermosa to open a manufacturing plant so imported bulbs can be replaced by local production. If Hermosa makes the investment, it will operate the plant for five years and then sell the building and equipment to Argentine investors at net book value at the time of sale plus the value of any net working capital. (Net working capital is the amount of current assets less any portion financed by local debt.) Hermosa will be allowed to repatriate all net income and depreciation funds to the United States each year. Hermosa traditionally evaluates all foreign investments in U.S. dollar terms. Investment. Hermosa's anticipated cash outlay in U.S. dollars in 2012 would be as follows: All investment outlays will be made in 2012, and all operating cash flows will occur at the end of years 2013 through 2017 Depreciation and Investment Recovery. Building and equipment will be depreciated over five years on a straight-line basis. At the end of the fifth year, the $1,300,000 of net working capital may also be repatriated to the United States, as may the remaining net book value of the plant. Calae Driran Ruhe local manufaa huuhe will ha endine the rantina noen anualant of nor eat Calculate the free cash flows in years 2012 through 2014 from the project's viewpoint below: (Round to the nearest dollar.) Hermosa Components: Baseline Analysis. Hermosa Beach Components, Inc., of California exports 26,000 sels of low density light bulbs per year to Argentina under an import license that expires in five years. In Argentina, the bulbs are sold for the Argentine peso equivalent of $60 per set Direct manufacturing costs in the United States and shipping together amount to $40 per set. The market for this type of bulb in Argentina is stable, neither growing northrinking, and Hermosa holds the major portion of the market The Argentine government has invited Hermosa to open a manufacturing plant so imported bulbs can be replaced by local production. If Hermosa makes the investment, it will operate the plant for five years and then sell the building and equipment to Argentine investors at net book value at the time of sale plus the value of any net working capital. (Net working capital is the amount of current assets less any portion financed by local debt.) Hermosa will be allowed to repatriate all net income and depreciation funds to the United States each year. Hermosa traditionally evaluates all foreign investments in U.S. dollar terms. Investment. Hermosa's anticipated cash outlay in U.S. dollars in 2012 would be as follows: All investment outlays will be made in 2012, and all operating cash flows will occur at the end of years 2013 through 2017 Depreciation and Investment Recovery. Building and equipment will be depreciated over five years on a straight-line basis. At the end of the fifth year, the $1,300,000 of net working capital may also be repatriated to the United States, as may the remaining net book value of the plant. Calae Driran Ruhe local manufaa huuhe will ha endine the rantina noen anualant of nor eat Calculate the free cash flows in years 2012 through 2014 from the project's viewpoint below: (Round to the nearest dollar.)
