Exhibit 1
Operating Cash Flows (pesos)
Item/Year 1 2 3 4 5 6 7 8 9 10
1. Unit sales 200.0 220.0 242.0 266.2 292.8 322.1 354.3 389.7 428.7 471.6
2. Selling price 458,000 549,600 659,520 791,424 949,709 1,139,651 1,367,581 1,641,097 1,969,316 2,363,179
4. Variable cost:
Local content 27,400,000 36,168,000 47,741,760 63,019,123 83,185,243 109,804,520 144,941,967 191,323,396 252,546,883 333,361,885
5. Variable cost:
Imported parts 11,800,000 14,278,000 17,276,380 20,904,420 25,294,348 30,606,161 37,033,455 44,810,480 54,220,681 65,607,024
6. Manufacturing overhead 9,200,000 10,580,000 12,167,000 13,992,050 16,090,858 18,504,486 21,280,159 24,472,183 28,143,010 32,364,462
8. Variable selling costs 9,160,000 12,091,200 15,960,384 21,067,707 27,809,373 36,708,372 48,455,052 63,960,668 84,428,082 111,445,068
9. Fixed selling costs 4,580,000 5,267,000 6,057,050 6,965,608 8,010,449 9,212,016 10,593,818 12,182,891 14,010,325 16,111,873
10. Licensing Fees 4,600,000 6,072,000 6,679,200 7,347,120 8,081,832 8,890,015 9,779,017 10,756,918 11,832,610 13,015,871
12. Taxable income (3-11) 18,310,000 29,905,800 47,172,066 70,831,041 103,071,629 146,808,154 205,917,049 285,550,145 392,549,229 535,994,498
13. Mexican income taxes
Exhibit 2
Working Capital (pesos)
Exhibit 3
Project Cash Flows: Mexican Subsidiary’s Viewpoint
(pesos, except where noted as dollars)
Cash Flow 0 1 2 3 4 5 6 7 8 9 10
1. Operating Cash Flow 17,169,800 24,482,324 34,555,454 48,342,226 67,112,789 92,558,097 126,927,194 173,208,919 235,372,372 318,685,010
(from Exhibit 1, line 15)
3. Initial Investment -72,000,000
5. Net cash flow (in pesos) -72,000,000 -10,310,200 15,688,724 22,947,902 33,020,257 46,887,790 65,861,099 91,687,156 126,692,070 173,970,130 578,469,256
Exhibit 4
Project Cash Flows: Parent’s Viewpoint
Year 0 1 2 3 4 5 6 7 8 9 10
Cash Flow/Expected Exchange
Item Rate 0.1389 0.1273 0.1167 0.1070 0.0981 0.0899 0.0824 0.0755 0.0692 0.0635 0.0582
2. Licensing Fees
a. Pesos 4,600,000 6,072,000 6,679,200 7,347,120 8,081,832 8,890,015 9,779,017 10,756,918 11,832,610 13,015,871
3. Dividends received
a. Pesos 0 0 0 17,254,442 25,108,249 35,762,466 50,161,393 69,560,015 95,624,992 130,568,260
4. Lost exports ($) -648,000 -720,000 -930,000
5. Terminal value***
a. Pesos 258,126,328
6. Total cash flow ($)
* There is no need to treat the Mexican withholding tax separately because the parent gets credit for it.
The parent owes a total of 35% in tax to the Mexican and U.S. governments; the exact split is not important for the analysis.