Hello, I have already completed the assignment, but I need Part A and Part B in ONE Excel file with all excel functions and formulas shown. Can you please add the Word document (which is Part A) t

Hello, I have already completed the assignment, but I need Part A and Part B in ONE Excel file with all excel functions and formulas shown.

Can you please add the Word document (which is Part A) to the excel file and make sure that all answers were answered correctly?

Thank you in advance.

Attachment 1

Attachment 2

ATTACHMENT PREVIEW

Download attachment

Problem Assignments: Global Financial Investment

Assigned

Problems

1

Ann Page Co. … fixed costs $30,000 per year. Variable costs per unit are $17. Sales price per unit is $30.

a) What is the contribution margin of the product?

Answer:

$13.00

Contribution margin is unit sales price less unit variable cost.

Contribution margin = Sales – Variable cost

=

30-17

=

$13.00

b) Calculate the breakeven point in unit sales and dollars.

Answer:

Breakeven in units is

2,308

Breakeven in dollars =

$69,230.77

Breakevent point in units = Fixed cost / (Sales – variable cost)

=

30000/(30-17)

=

2308

Breakeven point in dollars = Fixed cost / Contribution margin ratio

Contribution margin ratio = Contribution margin / sales

=

13/30

=

43.33%

Break even point in dollars = 30000/43.33%

=

$69,236.10

c) What is the operating profit (loss) at:

i) 1,500 units per year?

-10500

Answer:

ii) 3,600 units per year?

24000

Answer:

Units

1500

3600

Sales

$45,000.00

$108,000.00

Variable cost

$25,500.00

$61,200.00

Contribution margin

$19,500.00

$46,800.00

Fixed cost

$30,000.00

$30,000.00

Operating Profit

$(10,500.00)

$16,800.00

d) Plot a breakeven chart using the foregoing figures.

Units

Sales

Fixed cost

Total cost

0

$-

$30,000.00

$30,000.00

1500

$45,000.00

$30,000.00

$55,500.00

2308

$69,240.00

$30,000.00

$69,236.00

3600

$108,000.00

$30,000.00

$91,200.00

2

Mrs. Jones owns 100 shares of stock in Daimler-Benz valued at 16.5 Euros per share. What is the value in $U.S. of her stock if:

a)

0.90

€ = $1

Answer:

1,650.00

Euros

Value of

1,650.00

Euros at

0.90

€ = $1 is

$1,833.33

Euro price

16.50

No. of shares

100.00

Shares value

1,650.00

Conversion to dollar = 1650/.90

=

1,833.33

b)

0.70

€ = $1

Answer:

Value of

1,650.00

Euros at

0.70

€ = $1 is

$2,357.14

Euro price

16.50

No. of shares

100.00

Shares value

1,650.00

Conversion to dollar = 1650/.70

=

2,357.14

c)

1.20

€ = $1

Answer:

Value of

1,650.00

Euros at

1.20

€ = $1 is

$1,375.00

Euro price

16.50

No. of shares

100.00

Shares value

1,650.00

Conversion to dollar = 1650/1.20

=

1,375.00

3

John is planning on purchasing his German dream car for

65,000

Euros

How much does he need in $U.S. if there are

0.98

Euros to the $U.S.?

Answer:

Value of

65,000

Euros at

0.98

€ = $1 is

$66,326.53

Value

65,000.00

Conversion to dollar = 65000/0.98

=

66,326.53

Value of 100 shares at €16.5 per share

0

1500

2308

3600

$-

$20,000.00

$40,000.00

$60,000.00

$80,000.00

$100,000.00

$120,000.00

Sales

Fixed cost

Total cost

ATTACHMENT PREVIEW

Download attachment

The Gibson Company is a United States (US) firm that is considering a joint venture with Brasilia, DF, a

Brazilian firm that grows and processes coffee beans. Gibson has a patent for a new coffee processing

method. This intellectual property is motivating Gibson to expand beyond importing coffee to engaging in a

joint venture to process the coffee. Gibson will invest $8 million in the proposed joint venture project, which

will help to finance Brasilia ‘s production using the newly patented process.

The Brazilian government has guaranteed that the after-tax profits (denominated in Reals, the Brazilian

currency) can be converted to US dollars at the current exchange rate and sent to the Gibson Company

each year. Current exchange rates can be found at

http://www.oanda.com.

For each of the first five years, 60 percent of the total profits will be distributed to Brasilia, while the

remaining 40 percent will be converted to dollars to be sent to Gibson. The income tax rate for the joint

venture will be 10%. However, the Brazilian government is considering raising the income tax rate to 30%.

At the present time, the Brazilian government doe not impose a separate income tax on profits sent out of

the country. However, the Brazilian government is considering imposing an additional 10 percent income tax

on profits distributed to a foreign company. Assume that there are no other forms of tax. After considering

the taxes paid in Brazil, assume an additional seven percent tax imposed by the US government on profits

received by Gibson Company.

The expected total profits resulting from the joint venture per year are as follows:

Year

Total Profits from Joint Venture (in

BRL)

1

40 million

2

60 million

3

70 million

4

90 million

5

120 million

Gibson’s average cost of debt is 6 percent before taxes. Its average cost of equity is 9 percent. Assume that

Gibson’s US income tax rate is 10 percent. Gibson’s capital structure is 70 percent debt and 30 percent

equity. Gibson adds between 2 and 5 percentage points to its cost of capital when deriving its required rate

of return on international joint ventures. Gibson plans to account for country and other risks within its cash

flow estimates.

Gibson is concerned about country risk in the following two forms:

(1) Will the Brazilian government increase the corporate income tax rate from 10 percent to 30 percent

(20 percent probability)? If this occurs, Gibson will receive additional tax credits on its US taxes,

resulting in no US taxes on the profits from this joint venture.

(2) Will the Brazilian government impose a separate income tax of 10 percent on the profits distributed

to foreign companies such as Gibson (20 percent probability)? If this occurs, Gibson will not

receive additional tax credits, and the company will still be subject to US tax on the profits from this

joint venture.

Assume that the two types of country risk are mutually exclusive. If it does anything, the Brazilian

government will only implement one of these changes in its tax policies (i.e., the increase in the basic

income tax on the profits of the joint venture or the additional income tax on profits distributed to foreign

companies). The Brazilian government may also choose to leave things as they are.

Assignment

1.

Determine Gibson’s cost of capital and required rate of return for the joint venture in

Brazil.

WACC = Proportion of debt * pre tax Cost of debt * (1- Tax rate) + proportion of equity * post

tax cost of equity

Unlock Solution Unlocking…

=70%*6%*(1-7%) + 30%*9%

=6.61%

Required rate of return from Joint Venture in Brasilia = WACC + risk premium for international

JV’s

=Between 6.61% + 2.00% =8.61% to 6.61% + 5.00% =11.61%

Thus, the required rate of return is between 8.61% to 11.61% depending on where the

company classifies Brazil within the international risk scenario. Assuming an average level of

risk, we can take an average of the range and set the required rate of return to 10.11%

2. Determine the discrete probability distribution of Gibson’s Net Present Value for this joint

venture and calculate the Expected Net Present Value.

Scenario 1:

Based on original assumptions

Year

Total Profits

From Joint

Venture (in

million BRL)

Gibson’s

share of

profits(in

million

BRL)

Income Tax

paid to

Brazilian

Govt @10%

(in million

BRL)

After tax

profits

distributed

to Gibson

(in million

BRL)

Convert

Yuan into

US $

@0.51878

(in million

$)

Income tax

paid in US

@7% (in

million $)

Net cash

flow after all

taxes (in

million $)

1

40.00

16.00

1.60

14.40

7.47

0.52

6.95

2

60.00

24.00

2.40

21.60

11.21

0.78

10.42

3

70.00

28.00

2.80

25.20

13.07

0.92

12.16

4

90.00

36.00

3.60

32.40

16.81

1.18

15.63

5

120.00

48.00

4.80

43.20

22.41

1.57

20.84

Year

Cash Flows

Asscoited with

JV (in million

$)

Discount

Factor

@10.11%

Discounted

value

0

-8.00

1.000

-8.00

1

6.95

0.908

6.31

2

10.42

0.825

8.60

3

12.16

0.749

9.11

4

15.63

0.680

10.63

5

20.84

0.618

12.88

NPV

39.52

Show entire document