You are back to your office after a long holiday in Caribbean Islands with your family members. This was a gift for your outstanding performance last year. Your predictions about exchange rate and interest rates were bang on target. This forecast helped your company to save over a hundred million dollars. Your CEO wants you to replicate this performance this fiscal. You have promised your daughter and your spouse that you will be taking them to Amazon forests for white water rafting next year.

Business Situation

Your company is the largest cloth manufacturer in the world in your segment. You are planning forays into the branded garments segment. Since you want to keep transportation costs at their minimum, you are planning to set up manufacturing bases in all the major markets. Think Global Act Local is your mantra, as well.

Plant and Machinery

It is expected that your three plants will be set up in Mexico, Brazil, and Australia. These plants will have about the same capacity and are likely to cost about USD ten million each. The construction period could be anywhere from two to five years, depending on the support received from local government officials. This investment could easily make your company the second largest manufacturer of cloth in that segment.

Ownership

Your company has a choice of either setting up a 100% subsidiary or a joint venture with one of the local companies.

Local Issues

There are local political parties who can make life difficult in Brazil. However, in Mexico and Australia you are likely to sail smoothly.

Cashflow

There are no credible estimates for cashflow because the local markets are an uncharted territory for you. All you know is: you goods will be priced in local currency.

Capital

On this front, you have multiple choices: (i) raising domestic equity in rupee terms, (ii) mix of debt and equity in rupee terms, (iii) USD denominated bond issue, (iv) raising local currency debt.

Question: Should your company make this investment? If yes, then which will be the best route to (a) maximiza-tion of profits, (b) minimizing risk, (c) finding the optional mix of profits and risk.

What all information to you need to arrive at these answers? How will you structure your analysis?