3P Turbo - Cross Border Investment in Brazil

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3P Turbo - Cross Border Investment in Brazil

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3P Turbo, Brazil, political environment, economic environment, cross-border valuation, cash flow

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Abstract

3P should consider investing in Brazil for several reasons. First, because Brazil is a large and developing country. Brazil is considered as a leader in the region. Also, Brazil has the ninth largest GDP in the world. Therefore, this is a diverse and large country with a lot of potentials where 3P Turbo can surely provide supply for a demanding demand. Brazil has shown to the world over the years its ability to be pro-business and its desire to be a serious business partner.

Why would 3P Turbo consider investing in Brazil?
How would you describe the economic and political environments of Brazil at that time?
For the cross-border valuation analysis, what are your estimated Brazilian real cash flows?
How do you account for the low-interest loan provided by the German vendor in the valuation analysis?
Based on the quantitative analysis of the project, does this project look attractive for 3P Turbo?
What are the questions Jason should ponder before deciding on the investment?
Perform a sensitivity and breakeven analysis of the value using the exchange rate as a factor

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[...] Costs production can be a significant risk for Brazilian automobile industry as producer might want to produce in country where labour cost and production cost could be cheaper. The opportunities is that Brazil is a developing country, meaning that there will be constant opportunities that will develop in the coming years. Also its membership to the MERCOSUR is an element that will guarantee business development int the region. This membership is also allowing trading at preferred tariffs which is an non-negligible element when considering trading. [...]

[...] 3.For the cross-border valuation analysis, what are your estimated Brazilian real cash flows? what discount rate would you use to discount the Brazilian real cash flows of the project? Is it possible to conduct cross-border valuation without calculating foreign currency cost of capital? How can you estimate the future exchange rates and what are those for this valuation? For the cross-border valuation analysis and to estimate the Brazilian real cash flow, we will use the Net Present Value (NPV) method to calculate it. [...]

[...] 2.How would you describe the economic and political environments of Brazil at that time? What about the Brazilian automobile industry? What are the risks and opportunities? The country is currently facing challenging economically and politically. The growth of the nation is declining while it used to be soaring in the past. This decrease is mainly due by a political instability. Indeed, the corruptions charges inflicted to politician has affected their credibility and power in the country. Also, the country has been affected by the global macro conditions. [...]

[...] This can give 3P Turbo and access to international trade that can boost its revenues. The country presents a solid and resilient economy. Also, Brazil is a large country with vast consumer market. Therefore, there will be an important demand for 3P Turbo. Moreover, the country has shown is political ability to pass reforms to improve the health and situation of the economy. The country has also a significant middle class which is an important factor in a country for its development. [...]

[...] Moreover, Jason should analyse the regulations in Brazil. Indeed, the automobile sector is one of the most regulated sectors. He should therefore analysis whether he would be able to comply with the regulations and standards. Top of Form 7.Perform a sensitivity and breakeven analysis of the value using the exchange rate as a factor. The spot exchange rate seems lower than the forward exchange rate. For instance, the spot exchange rate is 3.56 USD vs 3.74 USD for the forward exchange rate. [...]

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