Reference no: EM13810313
A U.S.- based firm, is considering a five- year project in Turkey. The following information is available about the project:
Initial investment. The initial investment of USD 750,000 is used to purchase capital equipment. This equipment will be depreciated straight line to zero. At the end of five years, the remaining equipment will be sold for Turkish lira (TRY) 250,000.
Working capital. The investment in working capital is TRY 200,000. There are no changes in working capital until the end of the project when the full amount is recovered.
Units, price, and costs. The firm will produce 1,250 units of a product annually. The selling price is expected to be TRY 600 in the first year. This price is expected to increase at a rate of 6 percent annually. The direct expense per unit is expected to be TRY 150 in the first year. This is expected to increase at a rate of 8 percent annually. Indirect expenses are expected to be TRY 65,000 annually.
Taxes and miscellaneous. Turkish taxes on income and capital gains are 33 percent. There are no additional withholding taxes. All cash flows are repatriated when generated, and there are no additional U. S. taxes. The parity conditions are assumed to hold between Turkey and the United States. The relevant inflation indexes indicate a rate of 3 percent for the United States and 5 percent for Turkey. Spot USDTRY equals 2.5. Brady’s USD denominated WACC is 12 percent.
QUESTION: Now assume that the TRY rate of annual depreciation doesn't follow parity conditions. What is the break-even rate of depreciation in TRY? Assuming the USD inflation is unchanged, what is the TRY inflation rate consistent with this break-even depreciation?
**Please assist in providing way to obtain answer using Excel**
|
Address emotional and spiritual needs of patients
: What does literature (journal articles, websites) say about spirituality and spiritual care, the history and use of it, does it work or not and what are other institutions implementing to address emotional and spiritual needs of patients?
|
|
What is the present value of the annuity
: A 10-year annuity pays $2,150 per month, and payments are made at the end of each month. If the interest rate is 12 percent compounded monthly for the first five years, and 8 percent compounded monthly thereafter, what is the present value of the ann..
|
|
Mortgage to finance the purchase of a large tract of land
: You have just arranged for a $1,580,000 mortgage to finance the purchase of a large tract of land. The mortgage has an APR of 5.8 percent, and it calls for monthly payments over the next 20 years. However, the loan has an eight-year balloon payment, ..
|
|
Analysis of an interview with someone
: This assignment involves a written analysis of an interview with someone from a cultural group different from your own about their experience working for an organization.
|
|
What is the break-even rate of depreciation in try
: Initial investment. The initial investment of USD 750,000 is used to purchase capital equipment. This equipment will be depreciated straight line to zero. At the end of five years, the remaining equipment will be sold for Turkish lira (TRY) 250,000. ..
|
|
Best practices for similar situations
: Include several recommendations you would make to the manager to help solve the problem based on your research into documented best practices for similar situations. (You may make assumptions about the scenario in order to propose solutions - just..
|
|
Bonds have six years remaining to maturity
: The Brownstone Corporation's bonds have 6 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 9%. What is the yield to maturity at a current market price of $803?
|
|
What is the definition for each of the factors
: What are weights that you would assign to each factor? What is the definition for each of the factors? What is your justification of why you have selected each factor? Explain why you weighted it the way that you did
|
|
An employee of the gap-loans to another employee
: John Roe, an employee of the Gap, loans $3,700 to another employee at the store. He will be repaid at the end of 4 years with interest at 16% compounded quarterly. How much will John be repaid? (Please use the following provided Table.) (Do not round..
|