Essentials Of Investments
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
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Question
Dj 3 finance
Eastland, a US based MNC, invests USD 14 million in a project in Singapore. At a spot rate of USDSGD = 1.7, this investment equals SGD 23.8 million.
This is a 4-year project generating revenues of Singapore dollars (SGD) 15 million during the first year and growing at 25% thereafter.
Direct expenses are assumed to be 40% of revenues.
Fixed costs are SGD 3 million. The initial investment is depreciated straight-line to zero for tax purposes. The salvage value is assumed to be SGD 500,000.
The corporate income tax rates in Singapore and the US are 25% and 35% respectively; a tax treaty allows Singapore taxes to be used as a foreign tax credit.
The Singapore subsidiary estimates a discount rate of 15
calculate the cash flow NPV and cashflow from subsidiary and Mnc perspective
please show the steps
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