Capital Budgeting Spreadsheet

Capital Budgeting Spreadsheet - 1 2 Initial Outlay-1200...

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                                                        Simple Example of International Capital Budgeting Initial outlay in foreign currency -1200 Op cash flows in foreign currency 500 600 Subsidiary borrows portion in F 600 200 200 Interest rate in F  10.0% 60 40 Depreciation in years st. line  3   (400)  (400) Cost of Equity in F for similar risk proj. 15.0% Tax rate in F 35% Tax rate in US 40% Firm's WACC  12.0% Expected exchange rate, F/$ 0.105 0.110 0.115 Salvage value 0 A. Compute Cash Flows in F w/o financing costs 0 1 2 Initial Outlay -1200 Operating Cash Flows, assume all cash 500 600 Depreciation  (400)  (400) Operating Income  100   200  Taxes  (35)  (70) Net income  65   130  Add back depr.  400   400  Net dash flow -1200  465   530  What is IRR? 14.8% What is WACC in F? 10.75% What is NPV at WACC in F?  90.0  B. Compute Cash Flows to U.S. Parent--focus on cash flows to equity holders
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Unformatted text preview: 1 2 Initial Outlay-1200 Operating Cash Flows, assume all cash 500 600 Interest (60) (40) Depreciation (400) (400) Operating Income 40 160 Taxes (14) (56) Net income 26 104 Add back depr. 400 400 Debt principle flows 600 (200) (200) Net Cash flow-600 226 504 FX Rate 0.105 0.110 0.115 US dollar cash flows $(5,714) $2,055 $4,383 Cumulative "profits" $- $- $723 Taxes (assume on excess of investment) $- $- $289 Net cash flow $(5,714) $2,055 $4,093 What is IRR? 25.4% What is parent's WACC? 12.0% What is NPV at parent's WACC? $1,455 700 200 20 (400) 0.120 3 700 (400) 300 (105) 195 400 595 3 700 (20) (400) 280 (98) 182 400 (200) 582 0.120 $4,850 $4,850 $1,940 $2,910...
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Capital Budgeting Spreadsheet - 1 2 Initial Outlay-1200...

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