Question

NAME 2. Titan Corp. has investments in Taiwan and Singapore. The expected cash flows for years 1, 2 and 3 are given below, as well as the expected exchange rates. Titan's rate of return is 8% a. Calculate the current value of the cash flows for 1. Year 1, 2. Year 2, and 3. Year 3. b. Calculate the current value of the cash flows from 1. Taiwan, and 2. Singapore. Taiwan Cash Flow in Exchange Rate Taiwan New Dollars (TWD) 333,000,000 $0.033/TWD 344,000,000 $0.034/TWD 411,000,000 $0.036/TWD Singapore Cash Flow in Exchange Rate Singapore Dollars (SGD) 5 6,000,000 $0.730/SGD 6 7,000,000 S0.732/SGD 78,000,000 $0.734/SGD Year 1 Year 2 Year 3 Current value of cash flows Taiwan Singapore a. Total: Years 1-3 Year 1 Year 3 b. Total: Each country

Answer 1

a], b]

Cash flow in $ each year = cash flow in foreign currency * exchange rate for that year

Current value of each cash flow = cash flow in $ / (1 + rate of return)ⁿ, where n = number of years after which the cash flow occurs.

B 2 Cash Flow in Year TWD 1 333,000,000 2 344,000,000 3 411,000,000 C Taiwan Exchange rate $0.033 $0.034 $0.036 D E F G Singapore Cash Flow in Cash Flow in Exchange Cash Flow SGD rate in $ 10,989,000 56,000,000 $0.730 40,880,000 11,696,000 67,000,000 $0.732 49,044,000 14,796,000 78,000,000 $0.734 57,252,000 8 Year 9 1 10 2 3 12 Total Taiwan 10,175,000 10,027,435 11,745,542 31,947,977 Singapore 37,851,852 42,047,325 45,448,483 125,347,660 Total 48,026,852 52,074,760 57,194,025 157,295,637

A Taiwan Singapore 2 Year Cash Flow in TWD Exchange rate 31 333000000 0.033 4 2 344000000 0.034 5 3 411000000 0.036 Cash Flow in $ =B3*C3 =B4*C4 =B5*C5 Cash Flow in SGD Exchange rate Cash Flow in $ 56000000 0.73 =E3*F3 67000000 0.732 =E4*F4 78000000 0.734 =E5*F5 8 Year Taiwan 9 1 =D3/(1+8%)^A9 10 2 =D4/(1+8%)^A10 113 =D5/(1+8%)^A11 12 Total =SUM(B9:B11) Singapore Total =G3/(1+8%)^A9 -SUM(B9:09) =G4/(1+8%)^A10 =SUM(B10:010) =G5/(1+8%)^A11 =SUM(B11:C11) SUM(C9:C11) =SUM(09:011)