Investor Currency (Centralized) and Foreign Currency (Decentralized) DCF ApproachesSpain/Russia: A company in Spain is acquiring...
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Investor Currency (Centralized) and Foreign Currency (Decentralized) DCF ApproachesSpain/Russia: A company in Spain is acquiring a company in Russia, and the Spanish company is attempting to value the Russian company in euros. After repatriation, taxes, and country-related risks are taken into consideration, the free cash flow forecasts of the Russian company for the next three years, stated in rubles, are 322.2 RUB million, 365.4 RUB million, and 430.7 RUB million, respectively; also, the continuing value of the company as of the end of Year 3 is 4,290.2 RUB million. The appropriate risk-adjusted discount rate for this companys cash flows, stated in euros, is 11% and is constant in each year. Both companies are only financed with common equity. Use the information in Exhibit P17.1 to measure the value of the Russian company in euros under both the investor currency and foreign currency discounted cash flow methods.
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