3. (40 points) Your firm is based in Germany and is considering an investment opportunity in the United States. The project will last for 2 years and require an investment of USD 1,000,000 at time zero. This initial investment has to be depreciated by 60% the first year and the remaining 40% in the second year. Revenues are forecasted to be USD 1,000,000 and USD 1,500,000 in year 1 and year 2, respectively. Costs will amount to USD 500,000 in both years. Terminal value is expected to be zero. Additional information: tax rate is 30% in US and 35% in Germany. Current USD USD spot exchange rate is S = 1.5. Inflation rate in Germany is 1% EUR EUR and in the US is 2.5%. a. (10 points) Compute the NPV of the project in EUR using the WACC as discount rate. Assume the WACC in EUR to be 4%. Should the German company accept or reject the project? b. (10 points) Compute the APV of the project in EUR choosing one of the two equivalent approaches to do so. The firm does not consider the use of debt to finance the project yet. (Hint: this APV is the sum of all- equity financed APV and tax savings from depreciation.) The unlevered (all-equity) return on equity in EUR, Ku, is 5% and the cost of debt in EUR, i, is 3%. Should the German company accept or reject the project