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Late in $2021,$ Telix Machine Company $($FMC$)$ management was contiderist equation of tex company's international botiness supplied foom subodiaries in Funce, Brani, and Taiwas as well as flom the thised Sater. The company was particularly mocessful if management to consider the flatiblity of further equntion of its business in the Aalan repion. special adaputions required. The Taiwanest subsidiary had been urging coeporate muspenest so epand its manufacharing capacity for several year. Howeves, an ahtenative scenario appeared mose promining. The lasian ecosoer, with its liseralised economic certain government incentives that were sot available in Taivan. Thereflue, FMC$\text{'}$s corperate magemest chore to flrst consider lindia for its Alias expansion and had a fous year invertment peofect propost perpored by the clier' fenacial offor's start.

The propout involved establichine a wholly owned wheldiary in ladia that nods peodoce machines for the lndian domestic

Page $455$ mader as well as for equort to other Ative cocustries. The intial equity invelsest would be $$1\mathrm{.}5$ million, equivalest to $67\mathrm{.}5$ million Intian rupees $($Rs$)$ at the exhange rate of Rs $45$ to the US$.$ Solur $($Asume that the lind as repee is freely coeverslele, and there acr so the forth your. The conbined capital would be sufforent to parchast plast and equipues of $$1\mathrm{.}1$ million and would cover other initial expendect, incloding wocking capital. The cost of equipenest instaltation weld be $$15,000,$ with another $$5,000$ for testing. No

Presest value factors at $16$ percent at as follows:

$\backslash$table$[[$Frist$,$Festor$],[1,0\mathrm{.}862],[2,0\mathrm{.}743],[3,0\mathrm{.}603],[4,0\mathrm{.}552]]$

Sales feercasts $($is visits$)$ act as flollow:

$\backslash$table$[[$Sales $($estil$)],[$Wre $($Pensutic$)($Expurt$)],[1,5\mathrm{.}800,12,800],[2,6,000,12,000],[3,7\mathrm{.}000,34000],[4,1,000,86\mathrm{.}000]]$

Sales forecasta $($in units$)$ are as follown:

$\backslash$table$[[,$Sales $($enits$)],[$Year$,($Dementie$),($Expert$)],[1,5,000,10,000],[2,6,000,12,000],[3,7,000,14,000],[4,8,000,16,000]]$

The initial selling price of a machine was to be Ra $4,500$ for both Indias domatic sales and expoet sales in the Amas region, and the selling price in both cases was to increase at an annoll rate of $10$ percent. The exhange rate between the Indian ruper and the U$.$S$.$ dollar wat expected to vary as follows:

$\backslash$table$[[$Jamaary $1,$ Year $1$ Ra $45$ per U$.$S$.$ dollar$],[$December $31,$ Year $1$ Ra $45$ per U$.$S$.$ dollar$],[$December $31,$ Year $2$ Ra $43$ per U$.$S$.$ dollar$],[$December $31,$ Year $3$ Ra $40$ per U$.$S$.$ dollar$],[$December $31,$ Year $4$ Ra $34$ per U$.$S$.$ dollar$]]$

The eash expenditure for operating expenses, exeladiag interest payments, would be Ra $44$ million in Year $1.$ This amoust was expected to increase at a rate of $8$ percent per year. The Indias subsidiary would be expected to par a royalry of Rs $20$ million so the parest company at the ead of each of the four yearn. In addition, in those years in which the rubuidiery generated a prode, in weald per a dividend to FMC equal to $100$ percest of net carniags. Through negotiation with the ledian government, the nubaidiary would be the Isdian subsidiary would be fully tasable in the United States at the U$.$S$.$ corporate tax rate of $21$ percent. Devidends received form the Indian substidiary would be exampt from U$.$S$.$ texation.

Assumiss the profect proposel is secepted$,$ FMC expects to be able to sell the ledies subsidiary an the end of the fourth year

Fuel $428$ for its salvage value. FMC also expects so be able so repatriate to the parent the cash balance at the end of Year $4.$ The cash balanse will of dividends paid to FMC$,$ after paying back the local bank loan, plat walvage value. The repatriated cash balance will be taxed in the United Suats at $21$ peroest only if there is a gain after dedacting the con of the original inversment.

Repuired

Calcalate the set present value $($NFY$)$ of the peopoed inversment in ledia from both a project and a partnt company perpective.

Recommend to Felix Machine Company's eeeperate management whether et sot to accept the propeas.