Maximum the mnc would pay for the potential target

Assignment Help Financial Management

Reference no: EM132070712

Assume a potential target in Japan generates cash flows of EUR 1,000 in year 1 and EUR 2,000 in year 2. Also assume that the predicted exchange rate for the next two years is a constant USD 1.00 per EUR and an MNC requires 10% rate of return. Assume no taxes. Show your work for full credit. (4 points)

a) What is the maximum the MNC would pay for the potential target? Note: 100/1.1 = 90.91 and 100/1.1^2 = 82.64

b) If the potential target is a public company with 1,000 shares outstanding, each trading for EUR 2, should the MNC purchase the target? Assume the current exchange rate is USD 1.20 per EUR and the shareholders require no premium.

Reference no: EM132070712

Questions Cloud

Determine two possible corporate governance challenges : Determine two possible corporate governance challenges that might be faced by Best Buy as a result of its rapid growth

What was the final price of the living room set : What was the final price (include cost of freight) of the living room set?

Write about the students thoughts and experiences : Students are required to keep a journal to free write about their thoughts, experiences, and observations, as prompts for discussion and writing assignments.

Rewrite the given problem related to dba : SYSDBA is a system privilege that allows and grant the user to shutdown, startup, create, drop and backup database.

Maximum the mnc would pay for the potential target : What is the maximum the MNC would pay for the potential target?

Tempe steel weighted average cost of capital : Calculate the firm's weighted average cost of capital where the firm's borrowing rate on debt is 7.8%,

What is the maximum potential profit of the production : (a) What is the maximum potential profit of the production system? (b) Find the bottleneck work center. Show why it is a constraint.

How do you account for the popularity : How do you account for the popularity of one of the following. Twitter, Facebook, Hip-hop, video games, home schooling, reality TV, fast food, flash, mobs.

Describe an efficient capital market for stocks : Describe an efficient capital market for stocks. Compare and contrast the weak form of market efficiency with the strong and semi-strong forms.

User Account

All Pages