Constructing a new manufacturing facility in brazil

Assignment Help Accounting Basics
Reference no: EM13768563

For the expansion, GBATT is exploring which of two possible approaches to take for constructing a new manufacturing facility in Brazil. In addition to analyzing the risks associated with the expansion, you have been asked to provide analysis for selecting the best approach for the new facility. The following is the information the CFO provided to you to assist in your analysis.

GBATT's current capital structure is:

  • 60% equity and 40% debt.
  • Stockholders require 6% return on their investment.
  • Bondholders require a 3% return.
  • The corporate tax rate is 35%.

GBATT has narrowed the choice between two facilities in two different parts of the country. Preliminary analysis has been completed and an estimate of the future net cash flows for each choice has been provided. The original cash flows were provided in U.S. dollars. Dollars are in thousands.


Choice A

Choice B



















After completing the risk analysis, use the information from the chart above to complete the following:

  1. Calculate GBATT's WACC.
  2. Using the WACC and the above cash flows, calculate the NPV of each project.
  3. Justify the importance of knowing a company's WACC and NPV.
  4. Recommend the facility to build based on the NPV.
  5. Use current exchange rates to convert the NPV's to the Brazil real.

Reference no: EM13768563

Develop a reliable estimate of completion

(a) Nair is only able to estimate whether the building can be completed by August 1, 2015, or not (Nair estimates that there is a 70% chance that the building will be comple

Earnings per share assuming bond conversion

During the year 2010, the corporation earned $600,000 after deducting all expenses. The tax rate was 30%. Calculate 1. Earnings per share 2. Earnings per share assuming bond c

Recognized along with the related expense

On December 20, DeCort Company received a $400 bill for advertising in December. The liability account, Accounts Payable, needs to be recognized along with the related expen

Should kirsten corporation accept the offer

Assume Kirsten Corporation has no alternative use for the facilities presently devoted to production of the B345 gaskets. If the outside supplier offers to sell the gaskets

Security innovation and changing capital structure

The changes in leverage discussed so far in this chapter have been accomplished using traditional securities, such as straight debt and equity, but firms that have specific

Research suggests that strategic management

Strategic management is that set of managerial decisions and actions that determine the long-run performance of a corporation. Which one of the following is NOT one of the b

Bamboo dividends received deduction

A. What is Bamboo's dividends received deduction? B. How would your answer change if the gross income from operations was $140,000 instead of $200,000?

What changes should be made to both the sarbanes-oxley act

Evaluate what changes should be made to both the Sarbanes-Oxley Act of 2002 and other current laws in order to make them more effective in deterring companies from committin


Write a Review

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd