IBS 801 Assignment 3

Multinational Cash Budget The Homeboy company, an American company. is considering opening a new production facility Australia. The main advantage of the move is to serve an growing Asian market, in particular 2 countries, India and Pakistan. The particulars of the project are below

Initial investment: $22,666,500 Australian Dollars Price and consumer demand, India Volume: Year 1 to Year 3: 400,000 Phones, Year 4 to Year 7 : 600,000 Phones Year 1 Price per phone: 5,650 Indian Rupee, Year 2 to Year 7 Price: 8% increase over prior years price. Price and Consumer demand, Pakistan Volume: Year 1 to Year 3: 100,000 Phones, Year 4 to Year 7 : 200,000 Phones Year 1 Price per phone: 12,650 Pakistani Rupee, Year 2 to Year 7 Price: 9% increase over prior years price. Variable costs can be divided into two buckets Labor will be $3.50 AUD per phone. It will increase by 5% starting in Year 2 (increasing 5% every year) Other variable costs including materials will be $2.50 AUD per phone, and will remain the same throughout the project. Fixed costs: $1,000,000 AUD per year, expected to increase by 2.5% from years 2 to year 4, then 3% years 5 to year 7 Marketing Cost: Homeboy company plans to advertise every year during the sporting event IPL and PSL. The cost of the advertisements will be 120,000,000 Indian Rupee for IPL. PSL however requires all advertisements costs to be paid in US Dollars. The cost in this case will be 80,000 USD per year. Funds are to be remitted from India and Pakistan directly to the US. Both India and Pakistan have the same considerations when it comes to Taxes Tax laws: 20% income tax Remitted funds: 15% withholding tax on remitted funds Exchange rates: Use the spot rate on March 31st, 2023. Appropriate discount rate is 8%. Salvage value: None Required rate of return: 12%. Required A. In Microsoft Excel, prepare a Multinational Cash Budget, as shown in Chapter 14, and covered in Week 10 Session in Australian Dollars. All currencies must be converted into USD on the closing exchange rate on March 31st, 2023.