Question: Please help me with this question and answer it completely. Thank you very much! Question 5 (25 marks) Textla Ltd. (TXLA), an Australian firm, wishes

Please help me with this question and answer it completely. Thank you very much!

Please help me with this question and answer it completely. Thank you

very much! Question 5 (25 marks) Textla Ltd. (TXLA), an Australian firm,

Question 5 (25 marks) Textla Ltd. (TXLA), an Australian firm, wishes to expand its electric car operations to East Asia as fierce competition has significantly affect demands across Europe. They plan to enter the East Asia markets through Malaysia. The plant expansion cost is RM 80mil which must be immediately expended. Moreover, TXLA would have to fund additional working capital of RM 5mil at the time of the expansion. Further investment in net working capital would be RM 5mil, RM 8mil, and RM 10mil in year 1, 2, and 3 respectively. TXLA will depreciate the plant at a rate of RM 4mil per year (starting in year 1) and will have to fund additional capital expenditures of RM 8mil per year to maintain and improve the plant. Although the project is assumed to have an infinite life, cash-flows are only projected up to three years and the terminal value of the project is computed based on the year 3 free cash-flow (FCF) assuming a growth rate that equals the Malaysian long- run GDP growth rate. The Earnings before Interests, Taxes, Depreciation and Amortisation (EBITDA) are projected to be $35mil, $45mil, and $55mil for year 1, year 2, and year 3, respectively. All taxes are paid in Malaysia in the year the income is earned. Tax treaties are in effect so that TXLA will have no tax obligations to the Australian Tax Office (ATO). The following information applies to the valuation. Malaysia Australia Price Inflation 2.00% 3.00% 2.00% 4.00% 30.00% 40.00% 5.00% Annual return on government bonds Corporate tax rate Equity market risk premium AUD Spot rate-S(AUD/RM) Before tax cost of debt Debt-to-value ratio (D/V) Systematic risk (beta) 0.2 6.00% 0.3 1.2 Malaysian long-run GDP growth rate 3.00% WACC 12.80% Required: A) Calculate the cost of capital, in Australia, for the project. (4 marks) B) Calculate the forward exchange rates, F.(AUD/RM) through F:(AUD/RM), for the years 1, 2, and 3 based on the spot rate and the interest rates given in the question. (round to 5 decimal places) (3 marks) C) Calculate the Free of Cash Flows of the project in RM from year 1 to year 3. (7 marks) D) What is the terminal value as of year 3? Use a perpetuity formula, the Free Cash Flows in RM for year 3, and the Malaysian growth rate assumption given in the question. Assume the appropriate discount rate is WACC. (3 marks) E) Calculate the AUD value of FCF for the years 0, 1, 2 and 3 and the terminal value using the forward rates calculated in (b). (5 marks) F) What is the NPV of the project from TXLA's perceptive (in AUD)? Should TXLA expand into the Asian market? (3 marks) Question 5 (25 marks) Textla Ltd. (TXLA), an Australian firm, wishes to expand its electric car operations to East Asia as fierce competition has significantly affect demands across Europe. They plan to enter the East Asia markets through Malaysia. The plant expansion cost is RM 80mil which must be immediately expended. Moreover, TXLA would have to fund additional working capital of RM 5mil at the time of the expansion. Further investment in net working capital would be RM 5mil, RM 8mil, and RM 10mil in year 1, 2, and 3 respectively. TXLA will depreciate the plant at a rate of RM 4mil per year (starting in year 1) and will have to fund additional capital expenditures of RM 8mil per year to maintain and improve the plant. Although the project is assumed to have an infinite life, cash-flows are only projected up to three years and the terminal value of the project is computed based on the year 3 free cash-flow (FCF) assuming a growth rate that equals the Malaysian long- run GDP growth rate. The Earnings before Interests, Taxes, Depreciation and Amortisation (EBITDA) are projected to be $35mil, $45mil, and $55mil for year 1, year 2, and year 3, respectively. All taxes are paid in Malaysia in the year the income is earned. Tax treaties are in effect so that TXLA will have no tax obligations to the Australian Tax Office (ATO). The following information applies to the valuation. Malaysia Australia Price Inflation 2.00% 3.00% 2.00% 4.00% 30.00% 40.00% 5.00% Annual return on government bonds Corporate tax rate Equity market risk premium AUD Spot rate-S(AUD/RM) Before tax cost of debt Debt-to-value ratio (D/V) Systematic risk (beta) 0.2 6.00% 0.3 1.2 Malaysian long-run GDP growth rate 3.00% WACC 12.80% Required: A) Calculate the cost of capital, in Australia, for the project. (4 marks) B) Calculate the forward exchange rates, F.(AUD/RM) through F:(AUD/RM), for the years 1, 2, and 3 based on the spot rate and the interest rates given in the question. (round to 5 decimal places) (3 marks) C) Calculate the Free of Cash Flows of the project in RM from year 1 to year 3. (7 marks) D) What is the terminal value as of year 3? Use a perpetuity formula, the Free Cash Flows in RM for year 3, and the Malaysian growth rate assumption given in the question. Assume the appropriate discount rate is WACC. (3 marks) E) Calculate the AUD value of FCF for the years 0, 1, 2 and 3 and the terminal value using the forward rates calculated in (b). (5 marks) F) What is the NPV of the project from TXLA's perceptive (in AUD)? Should TXLA expand into the Asian market

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