Suppose that Kittle Co. is a U.S. based MNC that is considering setting up a subsidiary in Singapore. Kittle would like this subsidiary to produce and sell guitars locally in Singapore, and needs assistance with capital budgeting. The duration of this project is four years, with an initial investment of 5$20,000,000 (Singapore dollars). Finally, Kittle managers have provided you with key data to estimate the net present value of the project. In particular, four key insights are shared by Kittle managers. 1. The forecasted exchange rate of the Singapore dollar over the four-year period is $0.50. 2. The salvage value is $12,000,000, which will be paid by the Singapore government in exchange for ownership of the subsidiary after four years. 3. The required rate of return is 15.00%. The following table, in rows (17)-(21), shows how these factors influence the capital budgeting analysis. Note: The discounted values cash flows to the parent are rounded to the nearest dollar. Use these rounded values when calculating row (22). (3) (9) 11. Host Government Tax 020.00% 12. After-Tax Earnings of Subsidiary 5$1,000,0005$4,000,0005$1,000,0005$4,000,0005$1,400,0005$5,600,000 (10) (11) 13. Net Cash Flow to Subsidiary (12) + 5$6,000,000 5$6,000,000 5$7,600,000 (8) 14. 5$ Remitted by Subsidiary 15. Tax withholding of Remitted Funds 5$6,000,0005$600,0005$6,000,0005$600,0005$7,600,0005$760,000 (i) 10.00% 16. 5$ Remitted After-Tax Withholdings 5$5,400,000 5$5,400,000 5$6,840,000 17. Salvage value 18. Exchange Rate of 5$ 19. Cash Flows to Parent [(16)+(17)] $2,700,000 (18) 20. PV of Parent Cash Flows (0 15.00% 21. Initial U.S. $ Investment by Parent $10,000,000 22. Cumulative NPV Year 4 100,000 units 5$380 5$38,000,000 5$260 5$26,000,000 5$1,000,000 5$1,000,000 5$2,000,000,00 5$30,000,000 $8,000,000 5$1,600,000 5$6,400,000 5$8,400,000 5$8,400,000 5$840,000 5$7,560,000 5$12,000,000 $0.50 $9,780,000 $5,591,747