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units
assuming that by time all organized, we are 01/01/1992
Discount Rates Used
Afiiliate
Parent
Initial Investment Outlay
Plant acquisition, retooling, etc..
Plant acquisition, retooling, etc..
Depreciation
WC Requirements
WC
A/P
Total WC Requirements
Sales and Revenue Forecasts
Profit-maximizing price
Demand
England
yearly increase
%
%
$US
155000000
77500000
% of sales
% of sales
/ unit
units (& )
%
France
yearly increase
units (& )
%
Germany
yearly increase
units (& )
%
()
($US)
[$US/]
[/$US]
%
/ unit
%
Material
yearly increase
Material Transferred from Parent
Material Transferred from Parent
1991
/ unit
%
$US/unit
/ unit
2
0.5000
Fixed Costs
License Fees
yearly increase
Overhead Allocations
yearly increase
Taxes
Effective Tax Rate
Effective Tax Rate
Allowed losses carried forward?
Witholding Tax
% of sales
%
% of sales
%
% in UK
% in US
0.4
0.325
YES
% in UK
0.11
Terminal Value
Terminal Value
2.5x Net cash Flow (last year)
note: recovery of WC in last year excluded
Divdends to Parent
% of CF
0.50
1992
1993
1994
1995
1996
0.1125
0.15
0.1125
0.15
0.1125
0.15
0.1125
0.15
0.1125
0.15
11071429
11071429
11071429
11071429
11071429
0.3
0.1
0.2
0.3
0.1
0.2
0.3
0.1
0.2
0.3
0.1
0.2
0.3
0.1
0.2
250
278
308
342
380
75000
0.1275
84562
0.1275
95343
0.1275
107499
0.1275
121205
0.1275
60000
72150
0.2025
86760
0.2025
80000
92520
0.1565
250
490
1.96
0.5102
278
534
1.92
0.5208
308
582
1.89
0.5291
342
633
1.85
0.5405
380
692
1.82
0.5495
40
43.04
0.076
46.31
0.076
49.83
0.076
53.62
0.076
70
73.99
0.057
60
31.25
78.21
0.057
60
31.75
82.67
0.057
60
32.43
87.38
0.057
60
32.97
60
30.61
0.03
0.0330
0.10
0.0363
0.10
0.0399
0.10
0.0439
0.10
0.05
0.0558
0.115
0.0622
0.115
0.0693
0.115
0.0773
0.115
0.4
0.325
0.4
0.325
0.4
0.325
0.4
0.325
0.4
0.325
YES
YES
YES
YES
YES
0.11
0.11
0.11
0.11
0.11
0.50
0.50
0.50
0.50
0.50
1997
1998
0.1125
0.15
0.1125
0.15
11071429
11071429
0.3
0.1
0.2
0.3
0.1
0.2
380
380
136658
0.1275
154081
0.1275
104328
0.2025
125454
0.2025
106999
0.1565
123744
0.1565
380
681
1.79282376
0.5578
0.985068
380
671
1.7660533156
0.5662
0.985068
57.69
0.076
62.08
0.076
92.36
0.057
60
33.47
97.62
0.057
60
33.97
0.0483
0.10
0.0531
0.10
0.0862
0.115
0.0961
0.115
0.4
0.325
0.4
0.325
YES
YES
0.11
0.11
0.50
0.50
units
units
units
units
/ unit
Total Revenue
Variable Costs
Labor
Materials
Materials from Parent
/ unit
/ unit
/ unit
Gross Profit
Fixed Costs
License Fees
Overhead Allocation
Witholding Taxes
Total Fixed Costs
Depreciation
1991
EBIT
Taxes
Net Income
Cash Flow
Terminal Value
-77500
-77500
PV Factor
PV of CF
-77500
NPV
-15974
Dividends Distributable
1992
1993
1994
1995
1996
1997
75
0
0
75
0
85
0
0
85
0
95
60
0
155
0
107
72
80
260
0
121
87
93
300
0
137
104
107
348
0
18750
23508
47846
88800
114184
132234
0.0400
0.0700
0.0306
0.0430
0.0740
0.0313
0.0463
0.0782
0.0317
0.0498
0.0827
0.0324
0.0536
0.0874
0.0330
0.0577
0.0924
0.0335
10546
12539
24275
42823
52273
63861
8204
10969
23571
45976
61911
68373
563
938
165
1665
11071
776
1311
229
2316
11071
1737
2974
518
5229
11071
3546
6155
1067
10768
11071
5015
8824
1522
15362
11071
6389
11394
1956
19739
11071
-4532
0
-2418
0
7270
128
24138
9655
35478
14191
37562
15025
-4532
-2418
7142
14483
21287
22537
-4532
11071
-3750
-2418
11071
-4702
7142
11071
-9569
14483
11071
-17760
21287
11071
-22837
22537
11071
-26447
2789
3952
8645
7794
9521
7162
0.8989
0.8080
0.7263
0.6528
0.5868
0.5275
2507
3193
6278
5088
5587
3778
1395
1976
4322
3897
4761
3581
1998
154
125
124
403
0
153246
0.0621
0.0976
0.0340
78104
75142
8145
14723
2515
25383
11071
38687
15475
23212
23212
11071
-30649
30649
64933
9086
0.4741
35094
32466
1991
1992
Dividend Received
Witholding Taxes
1395
153
1241
$US
621
US Taxes
$US
202
419
563
4500
Total Receipts
Total Receipts
$US
5063
2583
Taxes
839
After-Tax Receipts
1743
After-Tax Dividend
419
-155000
-155000
2162
0.87
PV of Cash Flow
-155000
1880
NPV
-112697
PV Factor
(in thousands)
1993
1994
1995
1996
1997
1998
1976
217
4322
475
3897
429
4761
524
3581
394
32466
3571
1759
3847
3468
4237
3187
28895
897
2004
1835
2290
1751
16117
292
651
596
744
569
5238
606
1352
1239
1546
1182
10879
776
5074
1737
9321
3546
15579
5015
18029
6389
20879
8145
24197
5849
3047
11057
5850
19125
10338
23044
12662
27268
15210
32341
18313
990
1901
3360
4115
4943
5952
2056
3949
6978
8547
10266
12361
606
1352
1239
1546
1182
10879
30649
2662
5301
8217
10093
11448
53889
0.76
0.66
0.57
0.50
0.43
0.38
2013
3486
4698
5018
4949
20259
Sensitivity Analysis
It would have been insightful to have more information on the risks that could stem from undertak
as we can see in Britain right now with the upcoming election, the GBP is under a lot of duress and co
for possible referendums that might take place if the Labor party wins.
From this information we could have conducted a sensitivity analysis with weighted probabiliti
Pound Assumptions
It would seem that a constantly depreciating pound without the mention of inflation expectations a
Without assessing the macro-environment and the differences in this environment between the US an
I would feel a lot more comfortable using these exchange rate forecasts if more information was provi
Working Capital
Again, just simply stating that WC needs will be 30% of sales or a net 20% would seem to predict t
Anyone who has looked at multi-nationals know that this is not the case. It would seem that forecastin
Had thes forecasts been for the paret company who has a longer history and better understanding of
ould stem from undertaking a foreign transaction such as this one. For example,
der a lot of duress and corporations are most certainly making contingency plans
with weighted probabilities of different outcomes to get a better picture of the ``true costs``
% would seem to predict that everyhing is going to run smoothly and that A/P will remain constant.
ould seem that forecasting working capital needs for a newly set-up affiliate is tougher than simply using a stra
better understanding of its WC needs, they could be forgiven but for a new venture in a foreign market, maybe
n constant.
than simply using a straight-line method.
a foreign market, maybe a more conservative approach could have been applied.