Minimal Limited, a Swedish company is a chocolates and health snacks producer. The company is considering opening
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Question:
a) The subsidiary is required to pay 5% of the subsidiary's annual sales. The expected sales in Thailand and Malaysia is expected to be THB2,000,000 and MYR300,000. The sales is expected to grow at 6% annually in Thailand and 5% in Malaysia per year until the end of year 2. Compute the present values of the 2-year license fees in SEK for the parent company from potential subsidiaries in Thailand and Malaysia.
b) The subsidiary will also requested to pay dividends to parent company in Sweden. The dividend for the first year in Thailand will be THB 300,000 and expected to grow at 3% a year until the end of year 2. Subsidiary in Malaysia is expected to pay RM32,000 for the first year and expected to grow at 4% a year until the end of year 2. Compute the present values of the 2-year dividend in SEK for the parent company from potential subsidiaries in Thailand and Malaysia.
c) The initial cost of the subsidiary in Thailand and Malaysia are THB500,000 and MYR50,000 respectively. The terminal value after 2 years is estimated at THB250,500 in Thailand whilst in Malaysia will be MYR30,000. Assume no withholding tax on the terminal value. Which country should Minimal Limited choose to open new subsidiary?
Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
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