Groupe Ariel S.A.: Parity Conditions and Cross-Border Valuation (Brief Case). Groupe Ariel. BZ. Beth Zimmerman. Updated 18 Parity Conditions and Cross- Border Valuation. Groupe Ariel S.A.. About Groupe Ariel. How should Groupe Ariel finance the project? In pesos Will this affect your conclusions on whether Groupe Ariel should approve the project?.
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Luehrman and David Lane This case consists primarily of excerpts from term sheets and prospectuses for six securities offerings made by US companies duringjust after the financial crisis and recession of Please formulate your solution in up to 8 pages Times New Roman 12pt, spacing 1. Luehrman This case examines some parts of Stryker Corporation’s systems and procedures for approving and authorizing capital spending of many different types, including buildings, machinery, and working capital for existing businesses, as well as transactions with third parties such as acquisitions, joint ventures, and licensing agreements.
Explore the relevance and influence of assumptions regarding parity conditions. Should Groupe Ariel approve the equipment purchase? If you wish to download it, please recommend it to your friends in any social system.
When parity does not hold, the two approaches can give very different answers and may even cause managers at headquarters and in the subsidiary to disagree about whether the project should be undertaken. One of the questions confronting the analyst at headquarters in Mulhouse, France, is whether to perform this analysis in Euros or pesos. If PPP holds, If purchasing power parity is expected to hold, then the best prediction for the one-period spot rate should be.
Luehrman and James Quinn.
The Case Centre is a not-for-profit company limited by guarantee, registered in England No and entered in the Register of Charities No The case introduces techniques of discounted cash flow valuation analysis in a multi-currency setting and can be used to teach basic international parity conditions related to the value of operating cash flows.
To make this website work, we log user data and share it with processors. Registration Forgot your password? The modifications to its capital budgeting procedures are partly intended to support the company’s efforts to continue this success. Download ppt “A case study Groupe Ariel S.
A major challenge for the analysis is deciding which currency to use, the Euro or the peso. We think you have liked this presentation. The old equipment is sold in year 0 forpesos, but the book value ispesos.
Check as far as possible to what extent relative purchasing power parity and interest rate parity is reflected in the historic data given in the case.
This is because the new equipment would have a useful life of 10 years.
Also be prepared to verbally present your arguments and results in class and discuss it with the other groups. Finance General Management Marketing. Tax ID No Go to advanced search. Groupe Ariel evaluates a proposal from its Mexican subsidiary to purchase and install cost-saving equipment at a manufacturing facility in Monterrey. Product details Share this page: Published by Berniece Grant Modified over 2 years ago.
Ariel requires a DCF analysis and an estimate of NPV for capital expenditures of this size in its newer foreign subsidiaries.
Include hedging and financing considerations into your discussion and recommendation. Total peso cash flows TN exhibit 5: Access this item You must be logged in to view this material. Compare the two sets of calculations and the corresponding NPVs. Skip to main content. Help Center Find new research papers in: It states that the cost of living in different countries is equal and exchange rates adjust to offset inflation differentials across countries.
A case study Groupe Ariel S.A.: Parity conditions and cross-border valuation.
The row of future exchange rates shows no change in currency values because inflation condditions the same in both countries. Try different assumptions regarding inflation rates. Finance, Accounting and Control. You can change your cookie settings at any time but parts of our site will not function correctly without them. There are three issues of senior unsecured notes, one floating rate note, one equity offering, and one convertible note.
After-tax cost savings are affected TN exhibit 4. Click here to sign up. Technology and Operations Management. About project SlidePlayer Terms of Service.
Groupe Ariel SA: Parity Conditions and Cross-border Valuation | The Case Centre, for educators
Parity Conditions and Cross-Border Valuation. Discount peso cash flows at a Peso discount rate and convert the NPV.
Remember me on this computer. What is its effect on the concluded NPVs? The improvements will allow the plant to automate recycling and remanufacturing of toner ariiel printer cartridges, an important part of Ariel’s business in many markets. Teaching note supplement software.
Luehrman and James Quinn Citation: How should Martin incorporate such an expectation into his NPV analysis?