Calculate the net present value, Corporate Finance

Assignment Help:

Here is the pro-forma income statement for Semen Indonesia, an overseas venture that Cemex is planning to invest in.


 In this exercise, you will need to evaluate the investment decision from the project point of view.  Some assumptions you may need are:

 ·  Initial Capital Expenditure (investment) = 25,000,000 million Rupiah

·   Net Working Capital requirement: 10% of the expected sales for each year, allocated in the beginning of the year.

·   Terminal Value at Year 5:  22,000,000 million Rupiah

·   Indonesian Corporate Income Taxes:  30%

·   Mexican Corporate  Income Taxes:  35%

·   Capital Structure: 50% debt, and 50% equity

·   Risk-free Rate in Indonesia:  30%

·   Risk-free Rate in the U.S.:  5%

·   Market Risk Premium in Indonesia:  10%

·   Market Risk Premium in the U.S.:  7%

·   Cost of debt used to finance the project:  38%

·   Cemex's beta in the U.S. market: 1.0%

·   Weighted average of the betas of the cement companies in Indonesia:  1.2

a)     Please prepare the cash flow statement for the project (project point of view)

b)     What the discount rate you would use to discount these cash flows (project point of view)?

c)      Please calculate the Net Present Value (NPV) of this international investment for the project point of view.


Related Discussions:- Calculate the net present value

What is implied forward rate of interest, Problem (a) The yields to ma...

Problem (a) The yields to maturity on five zero-coupon bonds are given below:                    Years to Maturity                 Yield (%)

Cash flow from an income statement, Describe how to build a cash flow from ...

Describe how to build a cash flow from an income statement.

What risks do the finance house and bank face, Question : a) What are ...

Question : a) What are the rationales for interest and currency swaps? b) A finance house and a bank each have a $1billion balance sheet. The finance house has lent out at

Merger and aquisition, It is given that company A will acquire company B wi...

It is given that company A will acquire company B with shares of common stock. Present earnings of A is rs. 20 million and of company B is rs. 5 million. Earning price per share of

Compxm exam, can you assist with the all the rounds in compxm exam?

can you assist with the all the rounds in compxm exam?

Mergers had on fees assessed for retail bank services?, What effects have m...

What effects have mergers had on fees assessed for retail bank services? A: The impact is not clear. Market conditions and the level of competition often determine the cost for

Determine the net present value-discount cash flows, Suppose GeKay Inc. has...

Suppose GeKay Inc. has a two-year lease over a small copper deposit; the government acquires all rights to the property at the end of the lease.  It is known that the deposit conta

Calculate the cost of capital for the project, Calculate the cost of capita...

Calculate the cost of capital for the project? (a) Describe how the weighted cost of capital for an MNC can be calculated? (b) Assume that a foreign project has a beta of 0.

Analytical derivation of the capital asset pricing model, Question: a) ...

Question: a) Give an analytical derivation of the Capital Asset Pricing Model (CAPM) and supplement your analysis with diagrammatic illustrations where appropriate. b) The

Write Your Message!

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