Natural Mosaic. Natural Mosaic Company (U.S.) is considering investing Rs54,000,000 in India to create a wholly...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Natural Mosaic. Natural Mosaic Company (U.S.) is considering investing Rs54,000,000 in India to create a wholly owned tile manufacturing plant to export to the European market. After five years, the subsidiary would be sold to Indian investors for Rs108,000,000. A pro forma income statement for the Indian operation predicts the generation of R$9,000,000 of annual cash flow, is listed in the popup table. The initial investment will be made on December 31, 2011, and cash flows will occur on December 31st of each succeeding year. Annual cash dividends to Natural Mosaic from India will equal 90% of accounting income. The U.S. corporate tax rate is 40% and the Indian corporate tax rate is 50%. Because the Indian tax rate is greater than the U.S. tax rate, annual dividends paid to Natural Mosaic will not be subject to additional taxes in the United States. There are no capital gains taxes on the final sale. Natural Mosaic uses a weighted average cost of capital of 12% on domestic investments, but will add six percentage points for the Indian investment because of perceived greater risk. Natural Mosaic forecasts for the rupee/dollar exchange rate on December 31st for the next six years are listed in the popup table, a. What is the net present value and internal rate of return on this investment from the project's viewpoint? b. What is the net present value and internal rate of return on this investment from the parent's viewpoint? a. Calculate the cash flows in Indian rupees for years 2011 through 2013 below: (Round to the nearest whole number.) 2011 2012 2013 Rs 9,000,000 Rs 9,000,000 Rs (54,000,000) Annual cash flow (Rs) Initial investment (Rs) Sale value (Rs) Cash flows for discounting (Rs) Rs Rs Rs Data table Sales revenue Less cash operating expenses Gross income Less depreciation expenses Earnings before interest and taxes Less Indian taxes at 50% Net income Add back depreciation Annual cash flow Rs31,000,000 (17,000,000) Rs14,000,000 (4,000,000) Rs 10,000,000 (5,000,000) Rs5,000,000 4,000,000 R$9,000,000 Print Done - Natural Mosaic. Natural Mosaic Company (U.S.) is considering investing Rs54,000,000 in India to create a wholly owned tile manufacturing plant to export to the European market. After five years, the subsidiary would be sold to Indian investors for Rs108,000,000. A pro forma income statement for the Indian operation predicts the generation of R$9,000,000 of annual cash flow, is listed in the popup table. The initial investment will be made on December 31, 2011, and cash flows will occur on December 31st of each succeeding year. Annual cash dividends to Natural Mosaic from India will equal 90% of accounting income. The U.S. corporate tax rate is 40% and the Indian corporate tax rate is 50%. Because the Indian tax rate is greater than the U.S. tax rate, annual dividends paid to Natural Mosaic will not be subject to additional taxes in the United States. There are no capital gains taxes on the final sale. Natural Mosaic uses a weighted average cost of capital of 12% on domestic investments, but will add six percentage points for the Indian investment because of perceived greater risk. Natural Mosaic forecasts for the rupee/dollar exchange rate on December 31st for the next six years are listed in the popup table, a. What is the net present value and internal rate of return on this investment from the project's viewpoint? b. What is the net present value and internal rate of return on this investment from the parent's viewpoint? a. Calculate the cash flows in Indian rupees for years 2011 through 2013 below: (Round to the nearest whole number.) 2011 2012 2013 Rs 9,000,000 Rs 9,000,000 Rs (54,000,000) Annual cash flow (Rs) Initial investment (Rs) Sale value (Rs) Cash flows for discounting (Rs) Rs Rs Rs Data table Sales revenue Less cash operating expenses Gross income Less depreciation expenses Earnings before interest and taxes Less Indian taxes at 50% Net income Add back depreciation Annual cash flow Rs31,000,000 (17,000,000) Rs14,000,000 (4,000,000) Rs 10,000,000 (5,000,000) Rs5,000,000 4,000,000 R$9,000,000 Print Done -
Expert Answer:
Related Book For
Fundamentals of Multinational Finance
ISBN: 978-0205989751
5th edition
Authors: Michael H. Moffett, Arthur I. Stonehill, David K. Eiteman
Posted Date:
Students also viewed these finance questions
-
Carbon nanotubes (CNTs) are used for everything from structural reinforcement to communication antennas. The article Fast Mechanochemical Synthesis of Carbon Nanotube-Polyanaline Hybrid Materials (J....
-
Question 10 of 23 View Policies Current Attempt in Progress < The before-tax income for Pina Co. for 2025 was $102.000 and $72.700 for 2026. However, the accountant noted that the following errors...
-
Firefighters are assigned to different 8-hour shifts (A, B, C, D, E, or F) and each shift starts at the beginning of the period shown below. For example, shift A starts at 12 am, shift B starts at 4...
-
How can your knowledge of meat and meat cookery be used to understand protein substitutions for vegan dishes, such as tofu, texturized soy protein, grains, or beans?
-
Which of these hormones is most likely to directly cause a drop in blood pressure? a. Aldosterone b. Antidiuretic hormone (ADH) c. Erythropoietin d. Atrial natriuretic hormone (ANH)
-
A ductile cast-iron bar is to operate at a stress of 6000 psi for 1 year. What is the maximum allowable temperature?
-
E 13-3 Firm sales commitment Tuan Corporation enters into a firm sales commitment with Nyonya Corporation to sell 200,000 tons of coal deliverable in three months, on January 31, 2017, at the market...
-
NPV and AARR, goal-congruence issues. Nate Stately, a manager of the Plate Division for the Great Slate Manufacturing Company, has the opportunity to expand the division by investing in additional...
-
Financial Accounting Project 1 Chapters 1 - 5 ( Problem and Data ) 1 0 0 points Part 2 Complete the Worksheet Use the following data for adjustments, complete the rest of worksheet ( columns 3 - 1 0...
-
As the accountant for Runson Moving Company, you are preparing the companys annual return, Form 940 and Schedule A. Use the following information to complete Form 940 and Schedule A on pages 5-40 to...
-
he following trial balance of Sarasota Traveler Corporation does not balance. SARASOTATRAVELER CORPORATION TRIAL BALANCE APRIL 30, 2017 Debit Credit Cash$6,202Accounts...
-
Carrie enjoyed observing wildlife in natural habitats. She wanted to be able to hide at a distance but observe wildlife close up in a variety of circumstances. She visited five different shops and...
-
The operating budget for a certain company shows a net income of $350,000. To achieve this, the company is targeting sales of $637,000, variable costs of $280,280, and fixed costs of $6,720. Compute...
-
What is the output? for (i=0; i
-
a) For silicon, if EG decreases by 0.078 eV, by what fraction does n; increase (assume T is constant at 300K)? b) If the temperature rises from 300K to 600K, by what additional fraction does n;...
-
LOTR (1p) Frodo and Sam need to get to Mordor to destroy the One Ring, but they don't know the exact way. They met a creature called Gollum who claims to know the best way to Mordor. Gollum is...
-
Calculate the accounting rate of return. (why is anyone not giving me correct answer???) Please this time around make sure you give me tight answer Lakeside incorporated is considering replacing old...
-
How has the too-big-to-fail policy been limited in the FDICIA legislation? How might limiting the too-big-to-fail policy help reduce the risk of a future banking crisis?
-
Avon is a U.S.- based direct seller of a wide array of products. Avon markets leading beauty, fashion, and home products in more than 100 countries. As part of the training in its corporate treasury...
-
Kingdom Enterprises is a Hong Kong-based exporter of consumer electronics and files all of its financial statements in Hong Kong dollars (HK$). The company's European sales director, Phillipp Bosse,...
-
Aquatech is a U.S.-based company that manufactures, sells, and installs water purification equipment. On April 11, the company sold a system to the City of Nagasaki, Japan, for installation in...
-
6. Sum is a 100 percentowned subsidiary of a U.S. corporation. The country in which Sum is located has been determined to have a highly inflationary economy. Given this information, the functional...
-
E 14-7 Acquisitionexcess allocation On January 1, 2016, Minang Sdn. Bhd. of Malaysia acquired a 90 percent interest in Urden AG of Germany for 180 million Malaysian ringgits (MYR). The book value of...
-
7. An exchange gain on a long-term loan of a U.S. parent company to its British subsidiary whose functional currency is the British pound is: a Recognized in consolidated income currently b Deferred...
![Mobile App Logo](https://dsd5zvtm8ll6.cloudfront.net/includes/images/mobile/finalLogo.png)
Study smarter with the SolutionInn App