Suppose that the 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, Kittte 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 S$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. Complete row 22 of the table, filling in the cumulative net present value in each of the four years Note: The discounted values cash flows to the parent are rounded to the nearest dollar. Use these rounded values when calculating row (22) Year o Year 70,000 units 1. Demand Year 2 70,000 units 55.300 S300 5$21,000,000 55200 S$14,000,000 5$1,000,000 $$1,000,000 S$2.000.000,00 Year 100,000 units 54400 S$10,000,000 55250 5$25,000,000 S$1,000,000 551,000,000 5$2,000,000.00 S$29,000,000 S$21,000,000 55200 S$14,000,000 S$1,000,000 S$1,000,000 S$2,000,000.00 S$18,000,000 5$3,000,000 2.Price per Unit 3. Total Revenue 4. Variable Cost Per Unit 5. Total Variable Cost 6. Annual Lease Expense 7. Other Fixed Annual Expense 8. Noncash Expense (Depreciation) 9. Total Expense 10. Before Tax Earnings of Subsidiary (3)-(0) 11. Host Government Taxo 20.00% 12. After Tax Earnings of Subsidiary (10) - (11) 13. Net Cash Flow to subsidiary (12) (8) 14. 5$ Remitted by Subsidiary 15. Tax Withholding of Remitted Funds 10.00 5518,000,000 5$3,000,000 5$11,000,000 5$600,000 5$2.400.000 5$600,000 S$2,400,000 552,200,000 $50,000,000 $$4.400,000 554,400,000 5510.000.000 5$4.400,000 55440,000 554.400,000 5$440,000 5510,000,000 551,080,000 S$18,000,000 $$3,000,000 S$18,000,000 S$3,000,000 5$29,000,000 5511,000,000 9. Total Expense 10. Before Tax Earnings of Subsidiary (3)-(9) 11. Host Government tax o 20.00% 12. After Tax Earnings of Subsidiary (10) -- (11) 13. Net Cash Flow to Subsidiary (12) S$600,000 S$2,400,000 5$600,000 5$2,400,000 S$2,200,000 5$0,000,000 S$4,400,000 594,400,000 S$10,000,000 $54,400,000 5$40,000 $$4,400,000 $$440,000 S$10,000,000 S$1,000,000 $$1,960,000 S$3,960,000 $$9,720,000 14. S$ Remitted by Subsidiary 15. Tax Withholding of Remitted Funds 10.00% 16. S$ Remitted After Tax Withholdings 17. Salvage Value 18. Exchange Rate of 5$ 19. Cash Flows to Parent (16) (17) X (18) 20. PV of Parent Cash Flows 15.00% 21. Initial U.S. $ Investment by Parent $0.50 $0.50 $0.50 $1,980,000 $1,980,000 54.860,000 $1,721,739 $1.497,164 $3,195,529 $10,000,000 22. Cumulative NPV Suppose that the Co. is a U.S. based MNC that is considering setting up a subsidiary in Singapore. Kittle would like this subsidiary to produce and sell guitars locally in Singapore, and needs assistance with capital budgeting. The duration of this project is four years, with an initial investment of 5$20,000,000 (Singapore dollars). Finally, Kittte managers have provided you with key data to estimate the net present value of the project. In particular, four key insights are shared by Kittle managers. 1. The forecasted exchange rate of the Singapore dollar over the four-year period is $0,50. 2. The salvage value is S$12,000,000, which will be paid by the Singapore government in exchange for ownership of the subsidiary after four years. 3. The required rate of return is 15.00% The following table, in rows (17)-(21) shows how these factors influence the capital budgeting analysis. Complete row 22 of the table, filling in the cumulative net present value in each of the four years Note: The discounted values cash flows to the parent are rounded to the nearest dollar. Use these rounded values when calculating row (22) Year o Year 70,000 units 1. Demand Year 2 70,000 units 55.300 S300 5$21,000,000 55200 S$14,000,000 5$1,000,000 $$1,000,000 S$2.000.000,00 Year 100,000 units 54400 S$10,000,000 55250 5$25,000,000 S$1,000,000 551,000,000 5$2,000,000.00 S$29,000,000 S$21,000,000 55200 S$14,000,000 S$1,000,000 S$1,000,000 S$2,000,000.00 S$18,000,000 5$3,000,000 2.Price per Unit 3. Total Revenue 4. Variable Cost Per Unit 5. Total Variable Cost 6. Annual Lease Expense 7. Other Fixed Annual Expense 8. Noncash Expense (Depreciation) 9. Total Expense 10. Before Tax Earnings of Subsidiary (3)-(0) 11. Host Government Taxo 20.00% 12. After Tax Earnings of Subsidiary (10) - (11) 13. Net Cash Flow to subsidiary (12) (8) 14. 5$ Remitted by Subsidiary 15. Tax Withholding of Remitted Funds 10.00 5518,000,000 5$3,000,000 5$11,000,000 5$600,000 5$2.400.000 5$600,000 S$2,400,000 552,200,000 $50,000,000 $$4.400,000 554,400,000 5510.000.000 5$4.400,000 55440,000 554.400,000 5$440,000 5510,000,000 551,080,000 S$18,000,000 $$3,000,000 S$18,000,000 S$3,000,000 5$29,000,000 5511,000,000 9. Total Expense 10. Before Tax Earnings of Subsidiary (3)-(9) 11. Host Government tax o 20.00% 12. After Tax Earnings of Subsidiary (10) -- (11) 13. Net Cash Flow to Subsidiary (12) S$600,000 S$2,400,000 5$600,000 5$2,400,000 S$2,200,000 5$0,000,000 S$4,400,000 594,400,000 S$10,000,000 $54,400,000 5$40,000 $$4,400,000 $$440,000 S$10,000,000 S$1,000,000 $$1,960,000 S$3,960,000 $$9,720,000 14. S$ Remitted by Subsidiary 15. Tax Withholding of Remitted Funds 10.00% 16. S$ Remitted After Tax Withholdings 17. Salvage Value 18. Exchange Rate of 5$ 19. Cash Flows to Parent (16) (17) X (18) 20. PV of Parent Cash Flows 15.00% 21. Initial U.S. $ Investment by Parent $0.50 $0.50 $0.50 $1,980,000 $1,980,000 54.860,000 $1,721,739 $1.497,164 $3,195,529 $10,000,000 22. Cumulative NPV