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Klimewsky,Inc., a U.S.-based MNC, has screened several targets. Based on economic and political considerations, only one eligible target remains in Malaysia. Klimewsky would like you
Klimewsky,Inc., a U.S.-based MNC, has screened several targets. Based on economic and political considerations, only one eligible target remains in Malaysia. Klimewsky would like you to value this target and has provided you with the following information: .Klimewsky expects to keep the target for three years, at which time it expects to sell the firm for 500 million Malaysian ringgit (MYR) after any taxes paid. . Klimewsky expects a strong Malaysian economy. Consequently, the estimates for revenues for the next year are MYR300 million. Revenues are expected to increase by 9% over the following two years Cost of goods sold are expected to be 60% of revenues. Selling and administrative expenses are expected to be MYR40 million in each of the next three years. Depreciation expenses are expected to be MYR15 million per year for each of the next three years. The Malaysian tax rate on the target's earnings is expected to be 30%) . The target will need MYR9 million in cash each year to support existing operations. Any cash flows remaining after taxes are remitted by the target to Klimewsky, Inc(in the Us). Klimeysk.forecasts the exchange rate to be MYR/USD.23 for the next three years. . Note-1 MYR s worth $.23 Kliewsky's required rate of return on similar projects is 13%. Question 1-What is the maximum amount (USD)Klimewski could pay for the target and still produce a 13% return? Question 2-What is the maximum Klimewski could pay (USD)for the target and still produce a 13% return if the exchange rate is expected to be MYR/USD .22
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