A U.S printing company is planning to build a printing plant in Italy as a subsidiary. The project has the following cash flows in euros. Initial Investment in PPE for this project is expected to be 1,000,000. The project will require an increase in net working capital of 78,000. Economic life of the project is 2 years. The PPE will be owned by the Italian affiliate, and it will be depreciated straight-line to a zero book value in two years. The PPE is expected to have a market value of 74,000 in nominal terms at the end of the project. The company is expecting a cash flow of 78,000 in nominal terms from the recovery of the net working capital investment at the end of the project. Income and capital gains taxes are 50% in each country. The expected annual inflation rates in Italy and in the U.S. for the next two years are 4.04% and 2%, respectively. Nominal required returns on printing projects in Italy and in the U.S. are 14.24% and 12%, respectively. The current spot rate is $1.1800/. How much is the project cash flow in euros in Year 2? 1 2 0 -1,078,000 Initial Investment After-Tax Operating CFs Project Termination CF 700,000 750,000 Project CFs in euros -1,078,000 700,000 A U.S printing company is planning to build a printing plant in Italy as a subsidiary. The project has the following cash flows in euros. Initial Investment in PPE for this project is expected to be 1,000,000. The project will require an increase in net working capital of 78,000. Economic life of the project is 2 years. The PPE will be owned by the Italian affiliate, and it will be depreciated straight-line to a zero book value in two years. The PPE is expected to have a market value of 74,000 in nominal terms at the end of the project. The company is expecting a cash flow of 78,000 in nominal terms from the recovery of the net working capital investment at the end of the project. Income and capital gains taxes are 50% in each country. The expected annual inflation rates in Italy and in the U.S. for the next two years are 4.04% and 2%, respectively. Nominal required returns on printing projects in Italy and in the U.S. are 14.24% and 12%, respectively. The current spot rate is $1.1800/. How much is the project cash flow in euros in Year 2? 1 2 0 -1,078,000 Initial Investment After-Tax Operating CFs Project Termination CF 700,000 750,000 Project CFs in euros -1,078,000 700,000