Reference no: EM131871323

Valuing a Foreign Target Firm. A U.S. based MNC, Tech Inc., has screened several targets. Based on economic and political considerations, only one eligible target remains in malaise. Tech would like you to value this target and has provided the following information: Tech expects to keep the target for 3 years, at which time it expects to sell the firm for 300 million Maylasian ringgit (MYR) after ant taxes. Tech expects a strong Malaysian economy. The estimates for revenue for the next year are MYR 200 million. Revenues are expected to increase by 10 percent in each of the following 2 years. Cost of goods sold is expected to be 50 percent of revenue Selling and administrative expenses are expected to be MYR 30 million in each of the next 3 years. The Malaysian tax rate on the target's earnings is expected to be 35 percent. Depreciation expenses are expected to be MYR 20 million per year for each of the next 3 years. The target will need MYR 7 million in cash each year to support existing operations. The target's stock price is currently MYR 30 per share. The target has 9 million shares outstanding. Any remaining cash flows will be remitted by the target to Tech, Inc, Tech uses the prevailing exchange rate for the next 3 years. Tech's required rate of return on similar projects is 20% a) Prepare a worksheet to estimate the value of the Malaysian target based on the above information. b) Will Tech, Inc., be able to acquire the Malaysian target for a price lower than its valuation the target?