E Homework: Lab 11 Question 4, Problem 18-7 (algorithmic) Part 1 of 17 HW Score: 0%, 0 of 5 points O Points: 0 of 1 Save Hermosa Components: Baseline Analysis. Hermosa Beach Components, Inc., of California exports 24,000 sets of low-density light bulbs per year to Argentina under an import license that expires in five years. In Argentina, the bulbs are sold for the Argentine peso equivalent of $60 per set. Direct manufacturing costs in the United States and shipping together amount to $40 per set. The market for this type of bulb in Argentina is stable, neither growing nor shrinking, and Hermosa holds the major portion of the market. The Argentine government has invited Hermosa to open a manufacturing plant so imported bulbs can be replaced by local production. If Hermosa makes the investment, it will operate the plant for five years and then sell the building and book capital. by to repatriate all net income and depreciation funds to the United States each year. Hermosa traditionally evaluates all foreign investments in U.S. dollar terms. Investment. Hermosa's anticipated cash oulay in U.S. dollars in 2012 would be as follows: B. All investment outlays will be made in 2012, and all operating cash flows will occur at the end of years 2013 through 2017. Depreciation and Investment Recovery. Building and equipment will be depreciated over five years on a straight-line basis. At the end of the fifth year, the $1,400,000 of net working capital may also be repatriated to the United States, as may the remaining netbook value of the plant. Sales Price of Bulbs. Locally manufactured bulbs will be sold for the Argentine peso equivalent of $60 per set. Operating Expenses per Set of Bulbs. Material purchases are as follows: - Transfer Prices. The S10 transfer price ber set for raw material sold by the parent consists of $5 of direct and indirect costs incurred in the United States on their manufacture, creatina SS of pre-tax profit to Hermosa Beach. Calculate the free cash flows in years 2012 through 2014 from the project's viewpoint below: (Round to the nearest dollar.) 2012 2013 2014 24,000 24,000 60 $ $ 60 Project Cash Flows in Argentina: Project Viewpoint Annual units sold (sets) Sales price in Argentina per set Sales revenue Less direct manufacturing and shipping costs Less cost of U.S. components at $10/set Gross profit Less depreciation Pre-tax profit Less 40% Argentina taxes Net income Calculate the free cash flows in years 2012 through 2014 from the project's viewpoint below: (Round to the nearest dollar.) 2012 2013 2014 Project Cash Flows in Argentina: Project Viewpoint Annual units sold (sets) Sales price in Argentina per set 24,000 24,000 $ 60 $ 60 Sales revenue Less direct manufacturing and shipping costs Less cost of U.S. components at $10/set Gross profit Less depreciation Pre-tax profit Less 40% Argentina taxes Net income Add back depreciation Annual project cash flow Return of net working capital Initial investment $ (2,700,000) Free cash flow for discounting $ - Data table Building and equipment Net working capital Total investment $1,300,000 1,400,000 $2,700,000 Print Done - x Data table Materials purchased in Argentina (U.S. dollar equivalent) Materials imported from Hermosa Beach-USA Total variable costs $20 per set 10 per set $30 per set Print Done E Homework: Lab 11 Question 4, Problem 18-7 (algorithmic) Part 1 of 17 HW Score: 0%, 0 of 5 points O Points: 0 of 1 Save Hermosa Components: Baseline Analysis. Hermosa Beach Components, Inc., of California exports 24,000 sets of low-density light bulbs per year to Argentina under an import license that expires in five years. In Argentina, the bulbs are sold for the Argentine peso equivalent of $60 per set. Direct manufacturing costs in the United States and shipping together amount to $40 per set. The market for this type of bulb in Argentina is stable, neither growing nor shrinking, and Hermosa holds the major portion of the market. The Argentine government has invited Hermosa to open a manufacturing plant so imported bulbs can be replaced by local production. If Hermosa makes the investment, it will operate the plant for five years and then sell the building and book capital. by to repatriate all net income and depreciation funds to the United States each year. Hermosa traditionally evaluates all foreign investments in U.S. dollar terms. Investment. Hermosa's anticipated cash oulay in U.S. dollars in 2012 would be as follows: B. All investment outlays will be made in 2012, and all operating cash flows will occur at the end of years 2013 through 2017. Depreciation and Investment Recovery. Building and equipment will be depreciated over five years on a straight-line basis. At the end of the fifth year, the $1,400,000 of net working capital may also be repatriated to the United States, as may the remaining netbook value of the plant. Sales Price of Bulbs. Locally manufactured bulbs will be sold for the Argentine peso equivalent of $60 per set. Operating Expenses per Set of Bulbs. Material purchases are as follows: - Transfer Prices. The S10 transfer price ber set for raw material sold by the parent consists of $5 of direct and indirect costs incurred in the United States on their manufacture, creatina SS of pre-tax profit to Hermosa Beach. Calculate the free cash flows in years 2012 through 2014 from the project's viewpoint below: (Round to the nearest dollar.) 2012 2013 2014 24,000 24,000 60 $ $ 60 Project Cash Flows in Argentina: Project Viewpoint Annual units sold (sets) Sales price in Argentina per set Sales revenue Less direct manufacturing and shipping costs Less cost of U.S. components at $10/set Gross profit Less depreciation Pre-tax profit Less 40% Argentina taxes Net income Calculate the free cash flows in years 2012 through 2014 from the project's viewpoint below: (Round to the nearest dollar.) 2012 2013 2014 Project Cash Flows in Argentina: Project Viewpoint Annual units sold (sets) Sales price in Argentina per set 24,000 24,000 $ 60 $ 60 Sales revenue Less direct manufacturing and shipping costs Less cost of U.S. components at $10/set Gross profit Less depreciation Pre-tax profit Less 40% Argentina taxes Net income Add back depreciation Annual project cash flow Return of net working capital Initial investment $ (2,700,000) Free cash flow for discounting $ - Data table Building and equipment Net working capital Total investment $1,300,000 1,400,000 $2,700,000 Print Done - x Data table Materials purchased in Argentina (U.S. dollar equivalent) Materials imported from Hermosa Beach-USA Total variable costs $20 per set 10 per set $30 per set Print Done