Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Assume that in the original Ityesi example in Table , all sales actually occur in the United States and are projected to be $63.1 million

Assume that in the original Ityesi example in Table

image text in transcribed,

all sales actually occur in the United States and are projected to be $63.1 million per year for four years. Keeping other costs the same, calculate the NPV of the investment opportunity. Assume the WACC is 6.7%. The forward exchange rates are given below.

Year

0

1

2

3

4

Forward Exchange Rate

($/)

1.6735

1.6148

1.5119

1.6081

1.4927

Calculate the cash flows below:(Round to three decimal places. Forward exchange rates must be rounded to four decimal places.)

YEAR

0

1

2

3

4

Free Cash Flow (millions of pounds)

Forward Exchange Rate

Free Cash Flow (millions of dollars)

Sales in the US (millions of dollars)

Cash Flow (millions of dollars

1 Data Table TABLE 31.1 SPREADSHEET Expected Foreign Free Cash Flows from Ityesi's U.K. Project Year 2 3 Incremental Earnings Forecast (E millions) 1 Sales 2 Cost of Goods Sold 3 Gross Profit 4 Operating Expenses 5 Depreciation 6 EBIT 7 Income tax at 40% 8 Unlevered Net Income Free Cash Flow 9 Plus: Depreciation 10 Less: Capital Expenditures 11 Less: Increases in NWC 37500 37500 37500 37500 (15.625) 15.625) 15.625) 15.625) 21.875 21.875 21.875 21.875 (4.167) (5.625) (5.625) (5.625) (5.625) - (3.750) (3.750) (3.750) (3.750) (4.167) 12.500 12.500 2.500 12.500 1.667 5.000 5.000 (5.000 (5.000) (2.500) 7500 7500 7500 7500 3.750 3.750 3.750 3.750 (15.000) 12 Pound Free Cash Flow (17.500) 11.250 11.250 11.250 11.250

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Cases In Financial Reporting

Authors: Ellen Engel, D. Eric Hirst, Mary Lea McAnally

8th Edition

1618531220, 9781618531223

More Books

Students also viewed these Finance questions

Question

=+What do you think about the CDFI Fund, establish in 1994?

Answered: 1 week ago