QUESTION 86 For the next 4 questions suppose the following data holds: Baltimore Tile Company (U.S.) is considering investing Rs60,000,000 in India to create a wholly owned tile manufacturing plant to export to the European market. After three years the subsidiary would be sold to Indian investors for Rs70,000,000. A pro forma income statement for the Indian operation is shown below. Sales revenue Less cash operating expenses Rs 40,000,000 -17,000,000 Less depreciation expenses -5,000,000 Earnings before interest and taxes 18,000,000 Less Indian taxes at 50% Net income -9,000,000 9,000,000 The initial investment will be made on December 31, 2019, and cash flows will occur on December 31st of each succeeding year. Annual cash dividends to Baltimore Tile from India will equal 75% of accounting net income. The U.S. corporate tax rate is 40% and the Indian corporate tax rate is 50%. In addition to the corporate tax of 50%, Indian government is imposing 10% withholding tax on dividends repatriated to Baltimore Tile. Because the Indian tax rate is greater than the U.S. tax rate, annual dividends paid to Baltimore Tile will not be subject to additional taxes in the United States. There are no capital gains taxes on the final sale. Baltimore Tile uses a weighted average cost of capital of 14% on domestic investments, but will add 6 percentage points for the Indian investment because of perceived greater risk. Baltimore Tile forecasts the rupee/dollar exchange rate for December 31st on the next four years to be as follows: End-of-year Exchange Rate 2019 Rs50/$ 2020 Rs54/$ 2021 Rs58/$ 2022 Rs62/$ What is the net present value (in rupee) of the India project from the project viewpoint? O Rs 7.75m O Rs 8.25m O Rs 9.3m Rs 10.0m O Rs 12.5m QUESTION 87 What is the internal rate of return of the India project from the project viewpoint? 10.81% 19.63% O 24.45% 27.60% O 33.33% QUESTION 88 What is the net present value (in U.S. dollar) of the India project from the parent's viewpoint? O-Rs 228,547 O-Rs 356,318 Rs 571,289 Rs 1,231,657 O Rs 1,454,679 QUESTION 89 What is the internal rate of return of the India project from the parent's viewpoint? O 10.81% 19.63% 24.45% 27.60% O 33.33%