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| Teaching Since: | May 2017 |
| Last Sign in: | 409 Weeks Ago |
| Questions Answered: | 66690 |
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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Valuation of a Foreign Target Gaston Co. (a U.S. firm) is considering the purchase of a target company based in Mexico. The net cash flows to be generated by this target firm are expected to be 300 million pesos at the end of 1 year. The existing spot rate of the peso is $.14, while the expected spot rate in 1 year is $.12. All cash flows will be remitted to the parent at the end of 1 year. In addition, Gaston hopes to sell the company for 800 million pesos (after taxes) at the end of 1 year. The target has 10 million shares outstanding. If Gaston purchases this target, it would require a 25 percent return. The maximum value that Gaston should pay for this target company today is pesos per share. Show your work.
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