a. The earnings of a private European firm are 5 million, and the average P/E ratio of publicly traded European firms in the same industry is 12. This firm is considering the possibility of going public and issuing one million shares. If the private firm has similar growth potential and other characteristics similar to other publicly traded firms in the industry, what is the estimated value in millions of euros?

b. An MNC issues ten-year bonds denominated in 500,000 Philippines pesos (PHP) at par. The bonds have a coupon rate of 15 percent. If the peso remains stable at its current level of $.025 over the lifetime of the bonds and if the MNC holds the bonds until maturity, the financing cost to the MNC will be:

c. The U.S. risk-free rate is currently 3 percent. The expected U.S. market return is 10 percent. Solso, Inc. is considering a project that has a beta of 1.2. What is the cost of dollar-denominated equity?

d. Assume a U.S.-based subsidiary wants to raise $1 million by issuing a bond denominated in Pakistani rupees (PKR). The current exchange rate of the rupee is $.02. How many rupees does the MNC need to obtain the $1 million needed.

e. An MNC is considering establishing a two-year project in New Zealand with a $30 million initial investment. The firm's cost of capital is 12 percent. The required rate of return on this project is 18 percent. The project is expected to generate cash flows of NZ$12 million in Year 1 and NZ$30 million in Year 2, excluding the salvage value. Assume no taxes and a stable exchange rate of $.60 per NZ$ over the next two years. All cash flows are remitted to the parent. What is the approximate break-even salvage value in millions of New Zealand dollars?

f. Packer, Inc., a U.S. producer of tablet computers, plans to establish a subsidiary in Mexico in an effort to penetrate the Mexican market. Packers executives believe that the Mexican pesos value is relatively strong and will weaken against the dollar over time. If their expectations about the peso value are correct, how will this trend affect the feasibility of the project? Explain.