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# International Capital Budgeting, Dell Computers

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Suppose Dell Computers (of the US) is considering establishing a new production facility in Taiwan.

Calculate the APV of this investment given the following information and indicate if Dell should undertake this investment.

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#### Solution Preview

Spot Rate for TWD/USD US inflation rate Taiwanese inflation rate US interest rate Initial set-up cost Cash flow in year 1 Terminal value in year 2
TWD35/USD1 2% 6% 5% TWD35,000 TWD21,000 TWD21,000

I've divided this answer into three stages. First, figure out the exchange rate for each year. Second, ...

#### Solution Summary

I've divided this answer into three stages. First, figure out the exchange rate for each year. Second, figure out the cash flow for each year. Third, calculate the APV and make a decision

\$2.19