Superoot Company is a soft drink manufacturer in Malaysia that is considering setting up a manufacturing operation in Melbourne, Australia to be called Superoot Australia. The operational set-up costs would be A$240,000, which would be depreciated for Australian tax purposes on a straight line basis over three years. Superoot Australia would begin production in 2014.

The following estimates have been made:

(a) Production and sales would be 1 million bottles for 2014 and would remain unchanged through 2015 and 2016.

(b) The 2014 sales price in Australia would be A$5.00 per bottle and would remain fixed through the next three years.

(c) Production costs are estimated at A$4.00 per bottle through the next three years.

(d) General and administration expenses would be A$100 000 per year.

(e) All production is for sale (production volume equals sales volume) and all sales are for cash.

(f) Superoot Australia will remit (return) 100.0% of its reported profits each period back to the parent company as an annual cash dividend.

(g) The corporate tax rate in Australia is 30%; Malaysia is 25%.

Actual and expected exchange rates, by year, are:

2013: RM2.80/A$

2014: RM3.00/A$

2015: RM3.00/A$

2016: RM3.00/A$

Superoot Company has assigned a weighted average cost of capital of 16.0% to the project. In assessing the attractiveness of the Australian venture, Superoot Company will assign an after-tax value to its Australian plant at the end of 2016 equal to an infinite stream of remittances each assumed to be the same as its estimated 2016 remittance, discounted at 20% per annum. The higher discount rate is because the company is concerned about the political risk of a Malaysian firm manufacturing in Australia.

Required:

Calculate the Malaysian ringgit value to Superoot Company of its intended Australian operation as above at the end of 2013. Is the project viable?