GROUPE ARIEL S.A.PARITY CONDITIONS AND CROSS-BORDER VALUATION PDF

The value of the Project NPV was equal to the one computed using the spot exchange rate because of the presumption of the PPP equation, 92, Compare the two sets of calculations and the corresponding NPVs. How and why do they differ? In this case, the NPVs that were calculated are the exact same number. Basically, if purchasing power parity holds for the entire period of the investment there will be no difference between either of the approaches. If the PPP assumption would not exist and interest rates stay the same, depending on whether the euro depreciates or appreciates against the peso, the euro value NPV of the project would be greater or respectively less than the peso value.

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Case study solutions by top business students. Groupe Ariel S. The equipment will allow the company to automatically recycle and remanufacture cartridges of toner and printer. The corporate policy of Ariel necessitates an analysis of the discounted cash flow DCF and a net present value NPV estimate for capital expenditures in international markets. It is facing the challenge of coming up with the decision on which currency to use: the Euro or the peso.

How should this NPV be translated into Euros? Compute the two sets of calculations and corresponding NPVs. How and why do they differ? How should we incorporate such an expectation into his NPV analysis? Should Ariel approve the equipment purchase? Not the questions you were looking for? Click here. Case answers for Groupe Ariel S. To calculate the NPV of the recycling equipment we must know the difference in cost savings that the company would be getting if it switches from its old recycling equipment to the new machinery.

Using the operating costs from exhibit 2, we arrive at: In addition to the cost savings, the tax benefits of depreciation that is obtained through the capital expenditure should also be taken into account. Since the old equipment is being sold at instead of the book value of , we are getting a loss of We can get a tax benefit by showing this loss on our books.

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Groupe Ariel S.A. Case Study

LinkedIn Introduction Ariel-Mexico was one of the main wholly owned subsidiary of the company located in Mulhouse, France. Arnaud Martin had requested additional information for one of the investment proposal in which the subsidiary was thinking about to invest into. The Mexican investment proposal was basically a purchase of equipment for the company. This new equipment was basically a new automated machinery and by using this machines the company would be able to achieve a lot of labor and material savings. Currently, the company was using a manual process which was resulting in higher than expected material and labor costs for the company and as a result the net income for the company was dropping significantly.

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Groupe Ariel S.A.: Parity Conditions and Cross-Border Valuation

Case study solutions by top business students. Groupe Ariel S. The equipment will allow the company to automatically recycle and remanufacture cartridges of toner and printer. The corporate policy of Ariel necessitates an analysis of the discounted cash flow DCF and a net present value NPV estimate for capital expenditures in international markets. It is facing the challenge of coming up with the decision on which currency to use: the Euro or the peso.

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