MultinationalBusinessFinanceSixteenthEditionChapter18MultinationalCapitalBudgetingandCross-BorderAcquisitionsCopyright?2022,2019and2016PearsonEducation,Inc.AllRightsReservedLearningObjectives18.1 Explorethecomplexitiesofbudgetingforaforeignproject18.2 IllustratemultinationalcapitalbudgetingwiththecaseofCemexenteringIndonesia18.3 Describetheuseofrealoptionanalysis18.4 Examinetheuseofprojectfinancetofundandevaluatelargeglobalprojects18.5 Introducetheprinciplesofcross-bordermergersandacquisitionsMultinationalCapitalBudgetingandCross-BorderAcquisitions(1of2)Althoughtheoriginaldecisiontoundertakeaninvestmentinaparticularforeigncountrymaybedeterminedbyamixofstrategic,behavioral,andeconomicdecisions—aswellasreinvestmentdecisions—itshouldbejustifiedbytraditionalfinancialanalysis.Multinationalcapitalbudgeting,liketraditionaldomesticcapitalbudgeting,focusesonthecashinflowsandoutflowsassociatedwithprospectivelong-terminvestmentprojects.MultinationalCapitalBudgetingandCross-BorderAcquisitions(2of2)Capitalbudgetingforaforeignprojectusesthesametheoreticalframeworkasdomesticcapitalbudgeting.Thebasicstepsare:Identifytheinitialcapitalinvestedorputatrisk.Estimatecashflowstobederivedfromtheprojectovertime,includinganestimateoftheterminalorsalvagevalueoftheinvestment.Identifytheappropriatediscountratetouseinvaluation.ApplytraditionalcapitalbudgetingdecisioncriteriasuchasNPVandIRR.ComplexitiesofBudgetingforaForeignProject(1of4)Capitalbudgetingforaforeignprojectisconsiderablymorecomplexthanthedomesticcase:Parentcashflowsmustbedistinguishedfromprojectcashflows.Parentcashflowsoftendependontheformoffinancing.Additionalcashflowsgeneratedbyanewinvestmentinoneforeignsubsidiarymaybeinpartorinwholetakenawayfromanothersubsidiary.ComplexitiesofBudgetingforaForeignProject(2of4)Theparentmustexplicitlyrecognizeremittanceoffundsbecauseofdifferingtaxsystems,legalandpoliticalconstraintsonthemovementoffunds,localbusinessnorms,anddifferencesinthewayfinancialmarketsandinstitutionsfunction.Anarrayofnonfinancialpaymentscangeneratecashflowsfromsubsidiariestotheparent.ComplexitiesofBudgetingforaForeignProject(3of4)Managersmustanticipatedifferingratesofnationalinflation.Managersmustkeepthepossibilityofunanticipatedforeignexchangeratechangesinmind.Useofsegmentednationalcapitalmarketsmaycreateanopportunityforfinancialgainsormayleadtoadditionalfinancialcosts.Useofhost-government-subsidizedloanscomplicatesbothcapitalstructureandtheparent’sabilitytodetermineanappropriateweightedaveragecostofcapitalfordiscountingpurposes.ComplexitiesofBudgetingforaForeignProject(4of4)Managersmustevaluatepoliticalrisk,becausepoliticaleventscandrasticallyreducethevalueoravailabilityofexpectedcashflows.Terminalvalueismoredifficulttoestimate,becausepotentialpurchasesfromthehost,parent,orthirdcountries,orfromtheprivateorpublicsector,mayhavewidelydivergentperspectivesonthevaluetothemofacquiringtheproject.ProjectVersusParentValuation(1of3)Astrongtheoreticalargumentexistsinfavorofanalyzinganyforeignprojectfromtheviewpointoftheparent(Exhibit18.1).Cashflowstotheparentareultimatelythebasisfordividendstostockholders,reinvestmentelsewhereintheworld,repaymentofcorporate-widedebt,andotherpurposesthataffectthefirm’smanyinterestgroups.However,thisviewpointviolatesacardinalconceptofcapitalbudgeting—thatfinancialcashflowsshouldnotbemixedwithoperatingcashflows.Exhibit18.1MultinationalCapitalBudgeting:ProjectandParentViewpointsForlongdescription,seeslide38:Appendix1ProjectVersusParentValuation(2of3)Evaluationofaprojectfromthelocalviewpoint—theprojectviewpoint—servessomeusefulpurposes,butisshouldbesubordinatedtoevaluationfromtheparent’sviewpoint.Inevaluatingaforeignproject’sperformancerelativetothepotentialofacompetingprojectinthesamehostcountry,wemustpayattentiontotheproject’slocalreturn.Almostanyprojectshouldatleastbeabletoearnacashreturnequaltotheyieldavailableonhostgovernmentbonds.ProjectVersusParentValuation(3of3)Multinationalfirmsshouldinvestonlyiftheycanearnarisk-adjustedreturngreaterthanlocallybasedcompetitorscanearnonthesameproject.Iftheyareunabletoearnsuperiorreturnsonforeignprojects,theirstockholderswouldbebetteroffbuyingsharesinlocalfirms,wherepossible,andlettingthosecompaniescarryoutthelocalprojects.Mostfirmsappeartoevaluateforeignprojectsfrombothparentandprojectviewpoints.IllustrativeCase:CemexEntersIndonesia(1of9)CementosMexicanos,Cemex,isconsideringtheconstructionofacementmanufacturingfacilityontheIndonesianislandofSumatra.Thisprojectwouldbeawholly-ownedgreenfieldinvestment.Thecompanyhasthreemainreasonsfortheproject:InitiateaproductivepresenceinSoutheastAsiaTopositionCemextobenefitfrominfrastructuraldevelopmentintheregionThepositiveprospectsforIndonesiatoactasaproduce-for-exportsiteIllustrativeCase:CemexEntersIndonesia(2of9)ThefirststepistoconstructasetofproformafinancialstatementsforSemenIndonesia(inIndonesianrupiah).Thenextstepistocreatetwocapitalbudgets,theprojectviewpointandparentviewpoint.Financialassumptionsarethenmadeabout:CapitalinvestmentMethodoffinancingRevenue/costforecastsSeeExhibit18.2regardinginvestment,financing,andcostofcapitalassumptions.Exhibit18.2(3of4)InvestmentandFinancingoftheSemenIndonesiaProject(in000s)Forlongdescription,seeslide39:Appendix2ThecostoftheUS$loanisstatedinrupiahtermsassumingpurchasingpowerparityandU.S.dollarandIndonesianinflationratesof3%and30%perannum,respectively,throughoutthesubjectperiod.Exhibit18.2(2of2)InvestmentandFinancingoftheSemenIndonesiaProject(in000s)SemenIndonesia(Rp)AmountFinancingProportionCostAfter-taxCostComponentCostRupiahloan2,750,000,00012.5%35.000%24.500%3.063%Cemexloan8,250,000,00037.5%38.835%27.184%10.194%Totaldebt11,000,000,00050.0%blankblankblankEquity11,000,000,00050.0%40.000%40.000%20.000%Totalfinancing22,000,000,000100.0%blankWACC33.257%IllustrativeCase:CemexEntersIndonesia(3of9)Theexplicitdebtstructures,includingrepaymentschedules,arepresentedinExhibit18.3.Duetotheexpecteddepreciationoftherupiahagainstthedollar,theIndonesianincomestatementwillshowtheforeignexchangelossesonthedebtservice.Exhibit18.4showsSemenIndonesia’sproformaincomestatement.NetIncomebecomespositiveinprojectyear3.Exhibit18.3SemenIndonesia’sDebtServiceSchedulesandForeignExchangeGains/LossesForlongdescription,seeslide40:Appendix3TheloanbyCemextotheIndonesiansubsidiaryisdenominatedinU.S.dollars.Therefore,theloanwillhavetoberepaidinU.S.dollars,notrupiah.Atthetimeoftheloanagreement,thespotexchangerateisRp10,000=$1.00.Thisistheassumptionusedincalculatingthe“scheduled”repayingofprincipalandinterestinrupiah.Therupiah,however,isexpectedtodepreciateinlinewithpurchasingpowerparity.Asitisrepaid,the“actual”exchangeratewillthereforegiverisetoaforeignexchangelossasittakesmoreandmorerupiahtoacquireU.S.dollarsfordebtservice,bothprincipalandinterest.TheforeignexchangelossesonthisdebtservicewillberecognizedontheIndonesianincomestatement.Exhibit18.4SemenIndonesia’sProFormaIncomeStatement(millionsofrupiah)Forlongdescription,seeslide43:Appendix4EBITDA=earningsbeforeinterest,taxes,depreciation,andamortization.EBIT=earningsbeforeinterestandtaxes;EBT=earningsbeforetaxes.Taxcreditsresultingfromcurrentperiodlossesarecarriedforwardtowardnextyear’staxliabilities.Dividendsarenotdistributedinthefirstyearofoperationsasaresultoflossesandaredistributedata50%rateinyears3–5.

Allcalculationsareexactbutmayappearnottoaddduetoreporteddecimalplaces.Thetaxpaymentforyear3iszeroandyear4islessthan30%asaresultoftaxlosscarry-forwardsfrompreviousyears.IllustrativeCase:CemexEntersIndonesia(4of9)ThecapitalbudgetfortheSemenIndonesiaprojectfromaprojectviewpointisshowninExhibit18.5.TheresultisanIRRof19.1%andanegativeNPVwhentheprojectvalueisdiscountedusingtheWACCof33.257%.Theprojectisnotacceptable.Exhibit18.5SemenIndonesiaCapitalBudget:ProjectViewpoint(millionsofrupiah)Forlongdescription,seeslide46:Appendix5NWC=networkingcapital.NPV=netpresentvalue.DiscountrateisSemenIndonesia’sWACCof33.257%.IRR=internalrateofreturn,therateofdiscountyieldinganNPVofexactlyzero.Valuesinexhibitareexactandareroundedtothenearestmillion.IllustrativeCase:CemexEntersIndonesia(5of9)Aforeigninvestor’sassessmentofaproject’sreturnsdependsontheactualcashflowsthatarereturnedtoit,initsowncurrency(Exhibit18.6).ForCemex,thismeansthattheinvestmentmustbeanalyzedintermsofU.S.dollarcashinflowsandoutflowsassociatedwiththeinvestmentoverthelifeoftheproject,after-tax,discountedattheappropriatecostofcapital.Aswewillsee,theprojectstillyieldsanegativeNPV.Exhibit18.6SemenIndonesia’sRemittanceofIncometoParentCompany(millionsofrupiahandU.S.dollars)Forlongdescription,seeslide47:Appendix6NPVcalculatedusingacompany-determineddiscountrateofWACC+foreigninvestmentpremium,or11.98%+6.00%=17.98%.IllustrativeCase:CemexEntersIndonesia(6of9)Theparentviewpointcapitalbudgetisconstructedintwosteps.Isolatetheindividualcashflows,adjustedforanywithholdingtaxesimposedbytheIndonesiangovernmentandconvertedtoU.S.dollars.Theactualparentviewpointcapitalbudget,combinestheseU.S.dollarafter-taxcashflowswiththeinitialinvestmenttodeterminetheNPVoftheproposedIndonesiansubsidiaryintheeyes(andpocketbook)ofCemex.Cashflowestimatesareconstructedtoformtheparentviewpoint’scapitalbudget(bottomofExhibit18.6).IllustrativeCase:CemexEntersIndonesia(7of9)Mostcorporationsrequirethatthenewinvestmentsmorethancoverthecostofthecapitalemployedintheirundertaking.Itis,therefore,notunusualforthefirmtorequireahurdlerateof3-6%aboveitscostofcapital.AnNPVofzeromeanstheinvestmentis“acceptable.”ApositiveNPVispresentvalueofwealthreturnedtothefirmanditsshareholders.IllustrativeCase:CemexEntersIndonesia(8of9)Atthispointsensitivityanalysesarerunfromboththeprojectandparentviewpoints.Thiswouldincludeanalyzing(fortheproject):PoliticalrisksForeignexchangerisksOthersensitivityvariablesAndanalyzing(fortheparent):ArangeofdiscountratesVaryingcashflowpatternsIllustrativeCase:CemexEntersIndonesia(9of9)Portfolioriskismeasuredby:Standarddeviationofexpectedreturn:riskoftheindividualsecurityBeta:riskoftheindividualsecurityasacomponentofaportfolioForeigninvestmentsaremotivatedbytwoobjectives:Resource-seekingProduction-seekingRealOptionAnalysis(1of2)Thediscountedcashflow(DCF)analysisusedinthevaluationofSemenIndonesia,andincapitalbudgetingandvaluationingeneral,haslonghaditscritics.Importantly,whenMNEsevaluatecompetitiveprojects,traditionalcashflowanalysisistypicallyunabletocapturethestrategicoptionsthatanindividualinvestoptionmayoffer.Thishasledtothedevelopmentofrealoptionsanalysis.Realoptionsanalysisistheapplicationoftheoptiontheorytocapitalbudgetingdecisions.RealOptionAnalysis(2of2)Realoptionsisadifferentwayofthinkingaboutinvestmentvaluesandisacrossbetweendecision-treeanalysisandpureoption-basedvaluation.Realoptionvaluationalsoallowsustoanalyzeanumberofmanagerialdecisionsthatinpracticecharacterizemanymajorcapitalinvestmentprojects:TheoptiontodeferTheoptiontoabandonTheoptiontoaltercapacityTheoptiontostartuporshutdownProjectFinancingProjectfinanceisthearrangementoffinancingforlong-termcapitalprojects,largeinscale,longinlife,andgenerallyhighinrisk.Thefollowingfourbasicpropertiesarecriticaltothesuccessofprojectfinancing:SeparabilityofaprojectfromitsinvestorsLong-livedandcapital-intensivesingularprojectsCashflowpredictabilityfromthird-partycommitmentsFiniteprojectswithfinitelivesCross-BorderMergersandAcquisitionThedrivingfactorsbehindcross-borderM&AarepresentedinExhibit18.7.TheytendtobequickertoachievethanstartingfromscratchM&Amayalsobecost-effectiveInternationalmarketimperfectionsmayallowtargetfirmstobeundervaluedHowever,onthedownside:EasytopaytoomuchCorporateculturesmayclashPotentialhostgovernmentinterferenceExhibit18.7DrivingForcesbehindCross-BorderAcquisitionsForlongdescription,seeslide49:Appendix7GainingaccesstostrategicproprietaryassetsGainingmarketpoweranddominanceAchievingsynergiesinlocal/globaloperationsandacrossdifferentindustriesBecominglarger,andthenreapingthebenefitsofsizeincompetitionandnegotiationDiversifyingandspreadingtheirriskswiderExploitingfinancialopportunitiestheymaypossessandothersdesireTheCross-BorderAcquisitionProcessAcquisitionismuchmorecomplexthansimplydetermininganappropriateprice.Exhibit18.8showshowtheprocessbeginswithstrategicdecision-makingfollowedbyfinancialanalysis.Stage1:IdentificationandValuationStage2:CompletionoftheOwnershipChangeStage3:Post-AcquisitionTransitionManagementExhibit18.8TheCross-BorderAcquisitionProcessForlongdescription,seeslide50:Appendix8CurrencyRisksinCross-BorderAcquisitionsThepursuitandexecutionofacross-borderacquisitionposeanumberofchallengingforeigncurrencyrisksandexposuresforanMNE,whichmakesmanagementofcurrencyexposuredifficult.Onceconsummated,thecurrencyrisksandexposuresofthecross-borderacquisitionchangefrombeingatransaction-basedcashflowexposuretotheMNEtopartofitsmultinationalstructureandthereforepartofitsoperatingexposurefromthattimeforward.SeeExhibit18.9Exhibit18.9CurrencyRisksinCross-BorderAcquisitionsForlongdescription,seeslide51:Appendix9CopyrightThisworkisprotectedbyUnitedStatescopyrightlawsandisprovidedsolelyfortheuseofinstructorsinteachingtheircoursesandassessingstudentlearning.Disseminationorsaleofanypartofthiswork(includingontheWorldWideWeb)willdestroytheintegrityoftheworkandisnotpermitted.Theworkandmaterialsfromitshouldneverbemadeavailabletostudentsexceptbyinstructorsusingtheaccompanyingtextintheirclasses.Allrecipientsofthisworkareexpectedtoabidebytheserestrictionsandtohonortheintendedpedagogicalpurposesandtheneedsofotherinstructorswhorelyonthesematerials.Appendix1LongDescriptionforExhibit18.1LongtermforeigndirectinvestmentoveramultiyearperiodinvolvesthehomeU.S.dollarmarketandtheforeigncurrencyandcommercialmarket.ThemultinationalparentinvestsU.S.dollarcapitalintheforeignmarketatthespotratefortheinitialinvestment.ForeigncapitalinvestmentthenallowstheparentcompanytoconstructandoperateacementmanufacturingfacilityinIndonesia.Forthisproject,theparentviewpointofthecapitalbudgetisinU.S.dollars,andtheprojectviewpointofthecapitalbudgetisinlocalcurrency.Cashflowremittancestotheparentcompanyoccurovertimeatspotratesinthemarketplace,withpotentialforblockedfunds.ReturntopresentationAppendix2LongDescriptionforExhibit18.2Thedetailsareasfollows:List1,Investment:Averageexchangerate,R,Pperdollar.10,000;Costofinstalledcapacityindollarspertonne,110dollars;Installedcapacity,20,000;InvestmentinU.S.dollars.2,200,000dollars;Investmentinrupiah,22,000,000,000;Percentageofinvestmentinplantandequipment,80;PlantandequipmentinthousandsofR,p,17,600,000,000;Depreciationofcapitalequipmentinyears,10.00;AnnualdepreciationinthousandsofR,p,1,760,000,000.List2,Financing:Equity,11,000,000,000;Debt,11,000,000,000;Rupiahdebt,2,750,000,000;U.S.dollardebtinrupiah,8,250,000,000;Total,22,000,000,000;Note,U.S.dollardebtprincipal,825,000.List3.CostofCapital,CemexinMexico:Riskfreerate,6.000percent;Creditpremium,2.000percent;Costofdebt,8.000percent;Corporateincometaxrate,35.000percent;Costofdebtaftertax,5.200percent;Percentdebt,40.0percent;Cemexbeta,1.50;Equityriskpremium,7.000percent;Costofequity,16.500percent;Percentequity,60.0percent;WACC,11.980percent.List4.CostofCapital,SemenIndonesia:Riskfreerate,33.000percent;Creditpremium,2.000percent;Costofrupiahdebt,35.000percent;Indonesiacorporateincometaxrate,30.000percent;CostofU.S.dollardebtaftertax,5.200percent;CostofU.S.dollardebt,rupiahequivalent,38.835percent;CostofU.S.dollardebt,aftertax,rupiahequivalent,27.184percent;Percentdebt,50.0percent;SemenIndonesiabeta,1.000;Equityriskpremium,6.000;Costofequity,40.000percent;Percentequity,50.0percent;WACC,33.257percent.ReturntopresentationAppendix3(1of3)LongDescriptionforExhibit18.3Thecolumnshavethefollowingheadingsfromlefttoright.Spotrate,R,p,perdollar,10000,12621,15930,20106,25376,32028.Therowentriesareasfollows.Row1.Spotrate,R,p,perdollar,ProjectYear.10000,0.12621,1.15930,2.20106,3.25376,4.32028,5.Row2.Spotrate,R,p,perdollar,Indonesianloanat35%for8yearsinmillionsofrupiah.Loanprincipal.10000,2750000.12621,blank.15930,blank.20106,blank.25376,blank.32028,blank.Row3.Spotrate,R,p,perdollar,Interestpayment.10000,blank.12621,minus962,500.15930,minus928,921.20106,minus883,590.25376,minus822,393.32028,minus739,777.Row4.Spotrate,R,p,perdollar,Principalpayment.10000,blank.12621,minus95,939.15930,minus129,518.20106,minus174,849.25376,minus236,046.32028,minus318,662.Row5.Spotrate,R,p,perdollar,Totalpayment.10000,blank.12621,minus1,058,439.15930,minus1,068,439.20106,minus1,058,439.25376,minus1,058,439.32028,minus1,058,439.Row6.Spotrate,R,p,perdollar,Cemexloanat10%for5yearsinmillionsofUSdollars.Loanprincipal.10000,825.12621,blank.15930,blank.20106,blank.25376,blank.32028,blank.Appendix3(2of3)Row7.Spotrate,R,p,perdollar,Interestpayment.10000,blank.12621,minus82.50.15930,minus68.99.20106,minus54.12.25376,minus37.77.32028,minus19.78.Row8.Spotrate,R,p,perdollar,Principalpayment.10000,blank.12621,minus135.13.15930,minus148.65.20106,minus163.51.25376,minus179.86.32028,minus197.85.Row9.Spotrate,R,p,perdollar,Totalpayment.10000,blank.12621,minus217.63.15930,minus217.63.20106,minus217.63.25376,minus217.63.32028,minus217.63.Row10.Spotrate,R,p,perdollar,CemexloanconvertedtoR,patscheduledandcurrentspotrates,inmillionsofR,p.Scheduledat10,000R,pperdollar.Interestpayment.10000,blank.12621,minus825,000.15930,minus689,867.20106,minus541,221.25376,minus337,710.32028,minus197,848.Row11.Spotrate,R,p,perdollar,Principalpayment.10000,blank.12621,minus1,351,329.15930,minus1,486,462.20106,minus1,635,108.25376,minus1,798,619.32028,minus1,978,481.Row12.Spotrate,R,p,perdollar,Totalpayment.10000,blank.12621,minus2,176,329.15930,minus2,176,329.20106,minus2,176,329.25376,minus2,176,329.32028,minus2,176,329.Row13.Spotrate,R,p,perdollar,Actual,atcurrentspotrate.Interestpayment.10000,blank.12621,minus1,041,262.15930,minus1,098,949.20106,minus1,088,160.25376,minus958,480.32028,minus633,669.Row14.Spotrate,R,p,perdollar,Principalpayment.10000,blank.12621,minus1,705,561.15930,minus2,367,915.20106,minus3,287,494.25376,minus4,564,190.32028,minus6,336,691.Appendix3(3of3)Row15.Spotrate,R,p,perdollar,TotalPayment.10000,blank.12621,minus2,746,823.15930,minus3,466,864.20106,minus4,375,654.25376,minus5,522,670.32028,minus6,970,360.Row16.Spotrate,R,p,perdollar,CashflowsinR,ponCemexloaninmillionsofR,p.10000,8250000.12621,minus2,746,823.15930,minus3,466,864.20106,minus4,375,654.25376,minus5,522,670.32028,minus6,970,360.Row17.Spotrate,R,p,perdollar,Totalactualcashflows.10000.12621.15930.20106.25376.32028.Row18.Spotrate,R,p,perdollar,I,R,Rofcashflows.10000,0.38835.12621,blank.15930,blank.20106,blank.25376,blank.32028,blank.Row19.Spotrate,R,p,perdollar,ForeignexchangegainsorlossesonCemexloaninmillionsofR,p.Foreignexchangegainsorlossesoninterest.10000,blank.12621,minus216,2602.15930,minus409,082.20106,minus546,940.25376,minus580,770.32028,minus435,821.Row20.Spotrate,R,p,perdollar,Foreignexchangegainsorlossesonprincipal.10000,blank.12621,minus354,232.15930,minus881,453.20106,minus1,652,385.25376,minus2,765,571.32028,minus4,358,210.Totalforeignexchangelossesondebt.Minus570,494,blank.Minus1,290,535,minus2,199,325,minus3,346,341,minus4,794,031.ReturntopresentationAppendix4(1of3)LongDescriptionforExhibit18.4Thecolumnshavethefollowingheadingsfromlefttoright.Spotrate,R,p,perdollar,10000,12621,15930,20106,25376,32028.Therowentriesareasfollows.Row1.Spotrate,R,p,perdollar,ProjectYear.10000,0.12621,1.15930,2.20106,3.25376,4.32028,5.Row2.Spotrate,R,p,perdollar,Salesvolume.10000,blank.12621,8.15930,10.20106,12.25376,12.32028,12.Row3.Spotrate,R,p,perdollar,SalespriceinU.S.dollars.10000,blank.12621,58.15930,58.20106,58.25376,58.32028,58.Row4.Spotrate,R,p,perdollar,SalespriceinR,p.10000,blank.12621,732039.15930,923933.20106,1166128.25376,1471813.32028,1857627.Row5.Spotrate,R,p,perdollar,Totalrevenue.10000,blank.12621,5856311.15930,9239325.20106,13993541.25376,17661751.32028,22291530.Row6.Spotrate,R,p,perdollar,Lesscashcosts.10000,blank.12621,minus920,000.15930,minus1,495,000.20106,minus2,332,200.25376,minus3,031,860.32028,minus3,941,418.Row7.Spotrate,R,p,perdollar,Lessotherproductioncosts.10000,blank.12621,minus160,000.15930,minus260,000.20106,minus405,600.25376,minus527,280.32028,minus685,464.Appendix4(2of3)Row8.Spotrate,R,p,perdollar,Lessloadingcosts.10000,blank.12621,minus201,942.15930,minus328,155.20106,minus511,922.25376,minus665,499.32028,minus865,149.Row9.Spotrate,R,p,perdollar,Lessshippingcosts.10000,blank.12621,minus1,009,709.15930,minus1,640,777.20106,minus2,559,612.25376,minus3,327,495.32028,minus4,325,744.Row10.Spotrate,R,p,perdollar,Totalproductioncosts.10000,blank.12621,minus2,291,650.15930,minus3,723,932.20106,minus5,809,334.25376,minus7,552,134.32028,minus9,817,774.Row11.Spotrate,R,p,perdollar,Grossprofit.10000,blank.12621,3564660.15930,5515393.20106,8184207.25376,10109617.32028,12473756.Row12.Spotrate,R,p,perdollar,Grossmargin.10000,blank.12621,0.609.15930,0.597.20106,0.585.25376,0.572.32028,0.56.Row13.Spotrate,R,p,perdollar,Lesslicensefees.10000,blank.12621,minus117,126.15930,minus184,787.20106,minus279,871.25376,minus353,235.32028,minus445,831.Row14.Spotrate,R,p,perdollar,Lessgeneralandadministrative.10000,blank.12621,minus468,505.15930,minus831,539.20106,minus1,399,354.25376,minus1,942,793.32028,minus2,674,984.Row15.Spotrate,R,p,perdollar,E,B,I,T,D,A.10000,blank.12621,2979029.15930,4499067.20106,6504982.25376,7813589.32028,9352941.Row16.Spotrate,R,p,perdollar,Lessdepreciationandamortization.10000,blank.12621,minus1,760,000.15930,minus1,760,000.20106,minus1,760,000.25376,minus1,760,000.32028,minus1,760,000.Appendix4(3of3)Row17.Spotrate,R,p,perdollar,E,B,I,T.10000,blank.12621,1219029.15930,2739067.20106,4744982.25376,6053589.32028,7592941.Row18.Spotrate,R,p,perdollar,LessinterestonCemexdebt.10000,blank.12621,minus825,000.15930,minus689,867.20106,minus541,221.25376,minus377,710.32028,minus197,848.Row19.Spotrate,R,p,perdollar,Foreignexchangelossesondebt.10000,blank.12621,minus570,494.15930,minus1,290,535.20106,minus2,199,325.25376,minus3,346,341.32028,minus4,794,031.Row20.Spotrate,R,p,perdollar,Lessinterestonlocaldebt.10000,blank.12621,minus962,500.15930,minus928,921.20106,minus883,590.25376,minus822,393.32028,minus739,777.Row21.Spotrate,R,p,perdollar,E,B,T.10000,blank.12621,minus1,138,965.15930,minus170,256.20106,1120846.25376,1507145.32028,1861285.Row22.Spotrate,R,p,perdollar,Lessincometaxesof30percent.10000,blank.12621,blank.15930,blank.20106,blank.25376,minus395,631.32028,minus558,386.Row23.Spotrate,R,p,perdollar,Netincome.10000,blank.12621,minus1,138,965.15930,minus170,256.20106,1120846.25376,1111514.32028,1302900.Row24.Spotrate,R,p,perdollar,NetincomeinmillionsofU.S.Dollars.10000,blank.12621,minus90.15930,minus11.20106,56.25376,44.32028,41.Row25.Spotrate,R,p,perdollar,Returnonsales.10000,blank.12621,minus19.4percent.15930,minus1.8percent.20106,0.08.25376,0.063.32028,0.058.Row26.Spotrate,R,p,perdol