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Hi Sir,
I was working through the June 2015 paper and I couldn’t understand the last part of the Yilandwe question’s working.
Once they have calculated the cash flows in YR, the next part has the workings with remittable flows and contribution etc as per the answers published on the ACCA website.
Could you please explain that as I’m not able to get a grip on them
Thanks!
Having got the cash flows in YR, these are remitted to the US converting at the forecast exchange rates.
When looking at the cash flows to Imoni, then in addition to the remittances from Yilandwe, they also receive the royalty paid by Yilandwe and earn a contribution on the parts sold to Ylandwe (both of which gives rise to extra tax payable by Imoni).
Having got the total net cash flows to Imoni, we then discount at the cost of capital.
I do work through a similar example in my free lectures on foreign investment appraisal.
Thanks a lot 🙂
Will surely go through the lecture on foreign investment appraisal.
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