Page 49 - Demo

%u062c%u0645%u064a%u0639 %u0627%u0644%u062d%u0642%u0648%u0642 %u0645%u062d%u0641%u0648%u0638%u0629 %u0640 %u0627%u0625%u0644%u0639%u062a%u062f%u0627%u0621 %u0639%u0649%u0644 %u062d%u0642 %u0627%u0645%u0644%u0624%u0644%u0641 49 %u0628%u0627%u0644%u0646%u0633%u062e %u0623%u0648 %u0627%u0644%u0637%u0628%u0627%u0639%u0629 %u064a%u0639%u0631%u0636 %u0641%u0627%u0639%u0644%u0647 %u0644%u0644%u0645%u0633%u0627%u0626%u0644%u0629 %u0627%u0644%u0642%u0627%u0646%u0648%u0646%u064a%u0629earnings generated by the subsidiary be reinvested locally for at least a certain period before they can be remitted to the parent. Does this affect the evaluation process and the calculation of the NPV of the project or not?Example 4In the previous example, assuming that all funds are blocked until the subsidiary is sold, how does this affect the valuation process when calculating the NPV?Answer:In this case, all cash flows are considered as if they will occur in the final year of the project. The cash flows are added together, then converted to dollars based on the exchange rate of the final year and discounted at the discount rate based on the final year (i.e., year 4 in the previous example).Summation of all expected cash flows= S5.400.000+S5.400.000+ S6.840.000+S19.560.000 = 37,200,000NPV in case of good conditions =%u2212$10,000,000 + 37,200,000%u00d70.65(1+0.15)4 = 3,824,993NPV in case of bad conditions =%u2212$10,000,000 + 37,200,000%u00d70.37(1+0.15)4 = %u22122,130,388Example 5BBB Inc., a US MNC, wants to construct a manufacturing plant in Malaysia. The construction and installation will cost 20 million Malaysian Ringgit. ABC intends to leave the plant open for three years. During the three years of operation, cash flows are expected to be 8 million Ringgit, 9 million Ringgit, and 10 million Ringgit, respectively. Operating cash flows will begin one year from today and are remitted back to the parent at the end of each year. At the end of the third year, ABC expects to sell the plant for 2 million Malaysian Ringgit. ABC has the required rate of return of 10%. The current exchange rate is 0.23 $/Ringgit, and this value is expected to remain constant over the next three years.1- Calculate the NPV for this project.2- Assuming that all funds are blocked until the subsidiary is sold, how does this affect the valuation process when calculating the NPV?3- Assuming that all funds are blocked until the subsidiary is sold, and the parent company will reinvest the blocked funds in Malaysia at 5% interest rate, how does this affect the valuation process when calculating the NPV?4- In the previous question, assuming that the value of the Malaysian Ringgit will not be fixed, the inflation rate in the Ringgit is %uf070RIN = 4%, the inflation rate in dollars