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earnings next three years. It expects $53$ million Chinese yuan $($CNY$),41$ million Indian rupees $($INR$)$ and $38$

million Malaysian ringgit $($MYR$)$ proceeds of its three subsidiaries in year$-$one. It also forecasts the year$-$one

exchange rates $A$$$\frac{0\mathrm{.}22}{C}NY,A$$$\frac{0\mathrm{.}041}{\text{I}}NR$ and $A$$$\frac{0\mathrm{.}659}{M}YR.$

Calculate the total Australian dollar $($A$$)$ cash flow for year$-$one. $($enter the whole number with no sign or

symbol$)$

Answe

Perth International anticipates a $4\mathrm{.}65$ per cent increase in the year$-$one income of its subsidiaries in year$-$two. It

has information that the current $5\mathrm{.}48$ per cent, $8\mathrm{.}67$ per cent, $13\mathrm{.}82$ per cent and $10\mathrm{.}24$ per cent nominal interest

rate in Australia, China, India and Malaysia, respectively, will remain the same in the next three years. Due to

foreign currency higher nominal interest rate, subsidiaries will invest $24$ per cent, $55$ per cent and $39$ per cent of

their year$-$two earnings in China, India and Malaysia, respectively, for next year. Subsidiaries will remit their

remaining incomes $($i$.$e$.,$ after investment$)$ to the Australian parent. Perth International believes in the Purchasing

Power Parity with considering a $2\mathrm{.}44$ per cent real interest in Australia, China, India and Malaysia to calculate the

expected foreign currency value against the Australian dollar for year$-$two based on the year$-$one exchange

rates $A\frac{\text{\$}}{C}NY,A\frac{\text{\$}}{\text{I}}NR,$ and $A\frac{\text{\$}}{M}YR.$

What is the total Australian dollar $($A$$)$ cash flow for year$-$two? $($enter the whole number with no sign or symbol$)$

Answer:

In year$-$three, Perth International has a plan to expand the business in China, India and Malaysia. Consequently,

it forecasts an $9\mathrm{.}75$ per cent increase in year$-$one earnings of its subsidi$$ries in year$-$three. Perth International

anticipates $3\mathrm{.}4$ per cent, $7\mathrm{.}45$ per cent, $11\mathrm{.}12$ per cent and $9\mathrm{.}16$ per nominal interest rate in Australia, China,

Indian and Malaysia, respectively, in year$-$three. It considers the International Fisher Effects to calculate the value

of CNY$,$ INR and MYR against the Australian dollar in year$-$three using the year$-$two exchange rates A$$/$CNY$,$

$A\frac{\text{\$}}{\text{I}}NR,$ and $A\frac{\text{\$}}{M}YR.$

What is the total Australian dollar $($A$$)$ cash flow for year$-$three? $($enter the whole number with no sign or

symbol$)$

Answer:

The subsidiaries of Perth International remit their earnings and investment proceeds to the Australian parent at

the end of each year. The annual weighted average cost of capital or required rate of return of Perth

International is $6\mathrm{.}36$ per cent.

Calculate the current value of the Perth International Co$.$ using its expected cash flows in year$-$one, year$-$two and

year$-$three. $($enter the whole number with no sign or symbol$).$

Answer:

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