We consider the application of the country risk valuation framework to an emerging market where the local capital markets were not only underdeveloped, but represented a perfect case of optimal financial repression. 

We will also consider the tremendous investment opportunities available in emerging markets. 

 

 

 

Assignment Sheet
Emerging Markets Finance
Darden Graduate School of Business
Spring First Half 2002

Class #10, Thursday, February 14, 2002

Topic: Joint venture and valuation in markets under financial repression.

Guest lecture: Jack Perkowski, President and CEO of ASIMCO

Case: ASIMCO-NANYUE JOINT VENTURE IN CHINA, UVA-F-1374.

File: asimco-nanyue-student.xls

Assignment Questions:

  1. Is entry into China's automotive parts market a good strategic move for ASIMCO?  What are the major opportunities and risks you see in the venture?

  2. How is the proposed joint venture structured?  Who is the majority owner of the joint venture, ASIMCO or Chinese investors?

  3. Review ASIMCO's cash flow projection.  Are the assumptions reasonable?  Are the PPP-based exchange rate forecasts reasonable?

  4. Please estimate the US$ required rate of return for the projected cash flow and a long-term perpetual growth rate for the joint venture.

  5. Is US$7.8M for 51% of the joint venture a fair price?  Should Jack Perkowski go ahead with this joint venture?