Fat Tires (FT), a U.S.-based multi-national company, has screened several acquisition targets in Malaysia. FT has identified a Malaysian company, KL Rubber, which would provide a good strategic fit for FT. The estimates for revenue for the next year are MYR 200 million. Revenues are expected to increase by 6% into the foreseeable future (in MYR).

Expenses are expected to be 65% of revenue. The tax rate on the firm's earnings is expected to be 35%. Assume that there is no depreciation.

This exchange rate is currently $.2255 per MYR. Inflation is expected to average 6.5% in Malaysia and 2.0% in the U.S. FT has estimated their cost of capital for this project to be 12.5% (in terms of USD).

What is the maximum that FT should pay for KL Rubber?

Answer rating: 100% (QA)

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