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please help with the attached finance problem Carambola de Honduras Singer Wayne, a US based private oquity firm, is trying to determine what it should
please help with the attached finance problem
Carambola de Honduras Singer Wayne, a US based private oquity firm, is trying to determine what it should pay for a tool manufacturing firm in Honduras named Carambola Slinger Wayne estimates that Carambola will generate a free cash flow of 10 million Honduran Lempiras (Lp) next year and that this free cash flow will continue to grow at a constant rate of 60% per annum indefinitely A private equity firm like Slinger Wayne, however, is not interested in owning a company for long and plans to sell Carambola at the end of three years for approximately 10 limes Carambola's free cash flow in that year. The current spot exchange rate is Lp 14 1507/5, but the Honduran inflation rate is expected to remain at a relatively high rate of 16 5% per annum compared to the US dollar in Nation tate of only 4 5% per annum Slinger Wayne expects to earn at least a 215% annual rate of return on Interational investments like Carambola a. What is Carambola worth if the Honduran lempira were to remain fixed over the three-year investment period? b. What is Carambola worth it the Honduran Lempira wero lo change in value over time according to purchasing power party? m 0Step by Step Solution
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