Page 69 - AFM Integrated Workbook STUDENT S18-J19
P. 69
International operations and international investment appraisal
Solution
Vp m T 0 T 1 T 2 T 3
Net CF (Vp 100m + 3% p.a.) 103.0 106.1 109.3
Royalty (30.0) (30.0) (30.0)
TAD / BC (200.0) - 120.0
Taxable profit (127.0) 76.1 199.3
Tax (15%) (W1) - - (22.3)
TAD / BC 200.0 - (120.0)
Machine cost and sale (200.0) 120.0
CF (Vp m) (200.0) 73.0 76.1 177.0
Exchange rate (W2) 20 19.43 18.88 18.35
CF ($m) (10.00) 3.76 4.03 9.65
Royalty (W3) 1.54 1.59 1.63
Tax (25%) (0.39) (0.40) (0.41)
Extra US tax (W4) - - (0.81)
FCF (10.00) 4.91 5.22 10.06
DF 20% 1 0.833 0.694 0.579
PV (10.00) 4.09 3.62 5.82
NPV = $3.53 million
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