Schism Systems. Schism Systems Inc., manufactures design components for personal computers. Until the present, manufacturing has...

Transcribed Image Text:

Schism Systems. Schism Systems Inc., manufactures design components for personal computers. Until the present, manufacturing has been subcontracted to other companies, but for reasons of quality control Schism has decided to manufacture itself in Asia. Analysis has narrowed the choice to two possibilities, Penang, Malaysia, and Manila, the Philippines. At the moment only the summary of expected, after-tax, cash flows in the popup table is available. Although most operating outflows would be in Malaysian ringgit or Philippine pesos, some additional U.S. dollar cash outflows (expenses) would be necessary, also shown in the table. The Malaysia ringgit currently trades at MYR4.15 = USD1.00 and the Philippine peso trades at PHP51.08 = USD1.00. Schism expects the Malaysian ringgit to appreciate 2.0% per year against the dollar, and the Philippine peso to depreciate 5.2% per year against the dollar. If the weighted average cost of capital for Schism Systems is 14.0%, which project looks most promising on the basis of present value? Calculate the net dollar cash flows from the operations in Penang, Malysia for years 2022 through 2024 below: (Round the exchange rate to four decimal places and the dollar amount to the nearest cent.) Schism in Penang (After-tax) Net cash flows (ringgit) Expected exchange rate (ringgit/$) [spot/(1+0.02)] Cash flows ($) Cash outflows ($) Net total cash flows ($) 2022 2023 2024 MYR (27,000) MYR 7,800 MYR 6,700 $ EA A 4.1500 S S (110.00) SA (100.00) Schism Systems. Schism Systems Inc., manufactures design components for personal computers. Until the present, manufacturing has been subcontracted to other companies, but for reasons of quality control Schism has decided to manufacture itself in Asia. Analysis has narrowed the choice to two possibilities, Penang, Malaysia, and Manila, the Philippines. At the moment only the summary of expected, after-tax, cash flows in the popup table is available. Although most operating outflows would be in Malaysian ringgit or Philippine pesos, some additional U.S. dollar cash outflows (expenses) would be necessary, also shown in the table. The Malaysia ringgit currently trades at MYR4.15 = USD1.00 and the Philippine peso trades at PHP51.08 = USD1.00. Schism expects the Malaysian ringgit to appreciate 2.0% per year against the dollar, and the Philippine peso to depreciate 5.2% per year against the dollar. If the weighted average cost of capital for Schism Systems is 14.0%, which project looks most promising on the basis of present value? Calculate the net dollar cash flows from the operations in Penang, Malysia for years 2022 through 2024 below: (Round the exchange rate to four decimal places and the dollar amount to the nearest cent.) Schism in Penang (After-tax) Net cash flows (ringgit) Expected exchange rate (ringgit/$) [spot/(1+0.02)] Cash flows ($) Cash outflows ($) Net total cash flows ($) 2022 2023 2024 MYR (27,000) MYR 7,800 MYR 6,700 $ EA A 4.1500 S S (110.00) SA (100.00)