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Investment Management

Company A is looking to ivest in another country. This company plans on operating for 3 years and then reevaluating to see if this is a good idea or if they should pull out. To do this, it must be done in the native currency. The free cash flow is 38.63M (native is AB), year 2 is 44.33M, and year 3 is 50.48M. T
I have the following figures:

The exchange rate is The .038US/AB for all three years. WACC is 13%. The PV of the FCF's is equel to 368.78M or 13.82M. We have 1,000,000 shares that are outstanding and the debt to equity is 1:1. The current price per share id 185AB.

1.Should I make the deal to aquire this if it never exceeds 20% permium in US? 2.What about AB? 3.Are there any other things I should consider before making a final decision?

I am not sure how to put this into an excell sheet so any help will be appreciated. if you could do an ecell sheet using those numbers and then change a few of the assumed numbers in excell it would be more likely to help me understand this. I would like to, first,

Change the infation rate per annum to 7% but leave all other values the same
Then put the inflation rate back to original and change the discount rate to 23 with all others the same. The put original values back and change just the free cash flow to 60.13 susing ecell as well. Please explain how these calculations work so I can practice these formulas. I have finals coming up soon and this class seems to be the one that I can't get to understanding enough. As detailed as explanation as possible would be greatly appreciated.

Solution Preview

Please see the attached files.

DFC methodology, acquisitions, free cash flow
NOTE: The questions given herein do not supply the information adequately. As far as I am able to interpret about the given data and on the basis of some genuine assumptions I am moving forward with the problem.
ASSUMPTIONS: 1. the free cash flow given is assumed to be in the currency of the native country, as there is no clarity on the quotations made in the problem.
2. The present value calculated could not be reached, either there is some calculation mistake or some information is missing, therefore I have assumed it to be wrong and calculated the one which I think to be appropriate (supported by calculations in excel).
...

Solution Summary

More than 500 words of written solution and calculations in excel

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