Break-even offer price in singapore dollars

Reference no: EM131016859

Two years after Spartan has established a subsidiary in Singapore, forecasts predict a sustained depreciation of the Singapore dollar against the US dollar. Specifically, the exchange rate is forecast to be $0.7405, $0.7260, and $0.7409 for Years 2, 3, and 4, respectively. The original plan was to operate the subsidiary until the end of Year 4, and net cash flows of the subsidiary in Year 3 and Year 4 are expected to be S$8,750,000 and S$9,750,000, respectively. Suppose Spartan is thinking about divesting the subsidiary and has received an offer price of S$13,700,000. Should it divest the subsidiary if its discount rate is 16%? What is the break-even offer price in Singapore dollars?

Reference no: EM131016859

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