International Finance: investment in Australia (Managing Foreign exchange risk)

Abstract

Next PLC is considering to start a series of outlets in Australia. It is estimated that each outlet will cost approximately Aus$ 15m and they would establish 70 outlets over a period of two years. The cost of setting up each outlet includes fixtures and fittings worth Aus$ 4m, which is eligible for tax on a straight-line basis of 20% per annum. The other Aus$ 11m will be spent on a 5-year lease. The market research (costing £2m) has indicated that in the first year, each outlet can expect a sales of Aus$ 12m.