Answer all questions.

1. Suppose a firm's production function is given by Suppose a firm's production function is given by

\fDirections Case Study - International Expansion This is an International Expansion case study is about making the decision to expand into international markets. Read the Case Study below and answer the questions that follow the case study. Case Study One of the biggest decisions an organization will make is the decision to go from a national player to one that competes in International Markets. Most companies start out with more limited geographical plans; many just want to test their new idea in a city. state, region, etc. Depending on the product and target market, some find it better to go national right away. This exercise will deal with a company that has successfully marketed in the U.S. and now wants to expand internationally. Even though Canada and Mexico are considered international markets (anything that crossed a country border is considered international business), many U.S. companies include Canada and Mexico in their initial plans. Therefore, we will deal here with possible expansion into Europe. Asia, Africa, South America, Australia, etc. The company(s) we will look at may not choose to enter all at once, but again this depends on the product and target market. 1. There are two companies that want to expand their sales and profits by marketing their products outside of the U.S.A. SP Inc. has developed application software for use on PCs. VM Corp. manufactures electromechanical ventilators used in hospital Operating Rooms, Intensive Care Units and frequently in patient rooms. The SP software product is priced at $40OUS while the VM ventilators start at $15,000US. We can immediately see how different these products are, one basically a soft good and the other a bulking manufactured item. In the U.S., the SP software products are marketed in retail outlets and on the Internet. VM uses a professional sales force to sell their products to hospitals where demonstrations are usually required before a purchase decision is made. You will analyze these two situations and develop preliminary plans to launch these products internationally. First you will need to establish your target market and offer opinions on the following questions: Will the company continue to manufacture in the United States and ship abroad, or should they add a production facility closer to the intended international markets? o Appendix B has a list of methods and strategies that can be used when a company decides to go international. What strategy would be chosen by SP and VM? Will it be the same for both? If not. why not? In which continents/countries should SP and VM begin their international activities? Or, considering their product line, should they offer their products to all countries? Considering cultural, religious, sociocultural, technological, economic, legal and political differences, are there areas or countries that are better suited than others for their respective product lines? Are there areas or countries where their product line would meet resistance or be rejected? Why?Risk-adjusted discount rates-Basic Country Wallpapers is considering investing in one of three mutually exclusive projects, E. F. and G. The firm's cost of capital, r, is 15.2%, and the risk-free rate, RF, is 9.6%. The firm has gathered the following basic cash flow and risk index data for each project . a. Find the net present value (NPV) of each project using the firm's cost of capital. Which project is preferred in this situation? b. The firm uses the following equation to determine the risk-adjusted discount rate, RADR, for each project / : RADR, = RF + RI, x (r - RF) where RF - risk-free rate of return, RI, = risk index for project / , and r = cost of capital. c. Use the RADR for each project to determine its risk-adjusted NPV. Which project is preferable in this situation? d. Compare and discuss your findings in parts (a) and (c). Which project do you recommend that the firm accept? a. Find the net present value (NPV) of each project using the firm's cost of capital. i Data Table X The net present value for project E is $ . (Round to the nearest cent.) The net present value for project F is $ . (Round to the nearest cont.) (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) The net present value for project G is $ . (Round to the nearest cent.) Project ( / ) Which project is preferred in this situation? (Select from the drop-down menu.) E F G Initial investment (CF) $14,400 $11,000 $18,300 Project with the highest NPV, is preferred. Year (t ) Cash inflows (CF,) b. The firm uses the following equation to determine the risk-adjusted discount rate, RADR;, for each pr $6,100 $6,500 $3,700 6, 100 4,300 5,000 RADR; = RF + RI; x(r- RF) 6.100 5,500 7,300 6, 100 2,300 12,800 Enter your answer in each of the answer boxes. Risk index (RI;) 1.76 0.99 0.59