Hyundai Motor Company-Beijing Automotive Joint Venture Case Study Topics in Emerging Markets Prof. Mei April 9, 2003 Michael Cheng

After doing a DCF valuation of the Hyundai-Beijing Motor project, we get a positive NPV of $152,633,450 for the 8 year project. Although this valuation may not be entirely accurate because factors like inflation, political, social and economic risk are not wholly accounted for, we believe that it is a reasonable and rational valuation and will offer a reference point for the project. In the business world, especially in the emerging markets, anything can happen. What Hyundai must realize when investing so heavily in China, is that if the project fails for some reason, weather it be because of macro or micro factors, it will be a sunk cost. Rarely will you find other companies or countries that are willing to buy a plant that is in distress. Keeping all this in mind, Hyundai must make a decision on their plans for the 2005 expansion. It is our belief that Hyundai should venture into this relatively new emerging market to capture the market and benefit from the first mover advantage. Though the risks involved into this project are great, the benefits that can be reaped outweigh the risk in our opinion.