Complete rows (14a)-(14c) of the table, filling in the amount of Singapore dollars remitted in year 4 for each of the cash flows from years 1–3. Then, complete row (14d), filling in the total S$ accumulated from investing these blocked funds. Next, complete row (15), filling in the amount of Singapore dollars withheld for taxes and the total after-tax Singapore dollars to be remitted to the parent in row (16). Then, calculate and enter the resulting U.S. dollar cash flows to the parent in row (19).Note: Do not forget to account for the salvage value in row (19).______________________________________________Year 0Year 1Year 2Year 3Year 414. S$ to be Remitted by Subsidiary S$6,000,000S$6,000,000S$7,600,000S$8,400,00014a Year 1 Cash Flow Remitted in Year 4 @ 5.00% S$ 14b. Year 2 Cash Flow Remitted in Year 4 @ 5.00% S$ 14c. Year 3 Cash Flow Remitted in Year 4 @ 5.00% S$ 14d. Total Accumulated Funds over 4 years S$ 15. Tax Withholding of Remitted Funds @ 10.00% S$ 16. S$ Remitted After Tax Withholdings S$ 17. Salvage Value S$12,000,00018. Exchange Rate of S$ $0.5019. Cash Flows to Parent [(16) +(17)] X (18) $ 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 andsell guitars locally in Singapore, and needs assistance with capital budgeting. The duration of this project is four years, with an initial investment ofS$20,000,000 (Singapore dollars).Kittle Co. managers provide you key information regarding the project.1. The government in Singapore will tax any remitted earnings at a rate of 10.00%.2. The subsidiary will remit all of it's after-tax earnings back to the parent.3. The forecasted exchange rate of the Singapore dollar over the four-year period is $0.50.4. The salvage value is S$12,000,000, which will be paid by the Singapore government in exchange for ownership of the subsidiaryafter four years.5. The required rate of return is 15.00%.Furthermore, no funds can be remitted from the subsidiary to the parent until the subsidiary is sold for the salvage value at the end of the project. Inshort, those funds are blocked. Until then, all funds from the subsidiary will be invested in securities that yield a 5.00% return net of taxes per year.The following table shows a subsection Kittle's capital budgeting analysis.Complete rows (14a)-(14c) of the table, filling in the amount of Singapore dollars remitted in year 4 for each of the cash flows from years 1-3. Then,complete row (14d), filling in the total S$ accumulated from investing these blocked funds. Next, complete row (15), filling in the amount of Singaporedollars withheld for taxes and the total after-tax Singapore dollars to be remitted to the parent in row (16). Then, calculate and enter the resultingU.S. dollar cash flows to the parent in row (19).Note: Do not forget to account for the salvage value in row (19).Year

Cash flows represent the amount of cash produced by the firm from its normal operations.

Complete rows (14a)-(14c) of the table, filling in the amount of Singapore dollars remitted in year 4 for each of the cash flows from years 1–3. Then, complete row (14d), filling in the total S$ accumulated from investing these blocked funds. Next, complete row (15), filling in the amount of Singapore dollars withheld for taxes and the total after-tax Singapore dollars to be remitted to the parent in row (16). Then, calculate and enter the resulting U.S. dollar cash flows to the parent in row (19). Note: Do not forget to account for the salvage value in row (19). ______________________________________________ Year 0 Year 1 Year 2 Year 3 Year 4 14. S$ to be Remitted by Subsidiary S$6,000,000 S$6,000,000 S$7,600,000 S$8,400,000 14a Year 1 Cash Flow Remitted in Year 4 @ 5.00% S$ 14b. Year 2 Cash Flow Remitted in Year 4 @ 5.00% S$ 14c. Year 3 Cash Flow Remitted in Year 4 @ 5.00% S$ 14d. Total Accumulated Funds over 4 years S$ 15. Tax Withholding of Remitted Funds @ 10.00% S$ 16. S$ Remitted After Tax Withholdings S$ 17. Salvage Value S$12,000,000 18. Exchange Rate of S$ $0.50 19. Cash Flows to Parent [(16) +(17)] X (18) $

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

______________________________________________	Year 1	Year 2	Year 3	Year 4
14. S$ to be Remitted by Subsidiary	S$6,000,000	S$6,000,000	S$7,600,000	S$8,400,000
14a Year 1 Cash Flow Remitted in Year 4 @ 5.00%	S$
14b. Year 2 Cash Flow Remitted in Year 4 @ 5.00%		S$
14c. Year 3 Cash Flow Remitted in Year 4 @ 5.00%			S$
14d. Total Accumulated Funds over 4 years				S$
15. Tax Withholding of Remitted Funds @ 10.00%				S$
16. S$ Remitted After Tax Withholdings				S$
17. Salvage Value				S$12,000,000
18. Exchange Rate of S$				$0.50
19. Cash Flows to Parent [(16) +(17)] X (18)				$