Question
I am having problems filling in the blanks for Parent Company Perspective (in U.S. Dollars) in Yellow for years 2,3 & 4. The calculation must
I am having problems filling in the blanks for Parent Company Perspective (in U.S. Dollars) in Yellow for years 2,3 & 4. The calculation must be what the present value is (instructor provided the total) Case 10-1 Felix Machine Company
| Parent Company Perspective (in U.S. dollars) | ||||||||||
| Year 1 | Year 2 | Year 3 | Year 4 | Total | ||||||
| Exchange Rate | Rs 45 | 43 | 40 | 38 | ||||||
| Royalties (Rs 20,000,000) | $444,444 | $465,116 | $500,000 | $526,316 | ||||||
| Less: U.S. income tax (21%) | -93,333 | ($97,674) | ($105,000) | ($110,526) | ||||||
| Royalties (after tax) | $351,111 | $367,442 | $395,000 | $415,789 | ||||||
| Dividends (Earnings) | 0 | |||||||||
| Terminal value * | 0 | ** | ||||||||
| Total cash flow to parent | $351,111 | $367,442 | $395,000 | 415,789 | ||||||
| Present value factors (16%) | x 0.862 | 0.743 | 0.641 | 0.552 | _______ | |||||
| Present value | $302,658 | $288,647 | $611,328 | $1,469,637 | $2,672,270 | |||||
| Less: Initial investment | -1,500,000 | |||||||||
| Net present value (in U.S. $) | $1,172,270 | |||||||||
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Risk Management And Financial Institution
Authors: John C. Hull
2nd Edition
0136102956, 9780136102953
