Sevall Inc's Mexican Subsidiary, Cancunrocks, is expected to pay Sevall 1 Peso per share in 1 year
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Sevall Inc's Mexican Subsidiary, Cancunrocks, is expected to pay Sevall 1 Peso per share in 1 year after all foreign and US taxes have been accounted for. The exchange rate in 1 year is expected to be $0.10 dollars per peso. After this, the peso is expected to depreciate against the dollar by 2% forever due to inflation differences between the US and Mexico. The peso denominated dividend is expected to grow at 7% a year indefinitely. Sevall owns 10M shares of Cancunrocks. Assuming that the cost of equity is 12%, what is the valuation of Cancunrocks in US dollars?
Related Book For
Intermediate Financial Management
ISBN: 978-1285850030
12th edition
Authors: Eugene F. Brigham, Phillip R. Daves
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