Product details

This case serves as a foundation for student discussion of the estimation of required rates of return on investments in emerging markets. An associate in J P Morgan's Latin America M&A department is assigned the task of valuing the telephone-directory operations ('paginas amarelas' means 'yellow pages') of a large Brazilian conglomerate. All cash flows have been converted to US dollars, and present values computed for various discount rates. The remaining step is to determine the appropriate target rate of returns for dollar flows originating in Argentina, Brazil, and Chile. The capital-asset-pricing model is used, along with a political-risk premium and country beta. The necessary figure-work is comparatively light, leaving the student time to reflect on the need for various adjustments in estimating cross-border rates of return.