Assume that in the original Ityesi example in Table (below)..., all sales actually occur in the United States and are projected to be $ 57.2 million per year for four years. Keeping other costs the same, calculate the NPV of the investment opportunity.

Assume the WACC is 6.6 %. The forward exchange rates are given below.

Year 0 1 2 3 4

Forward Exchange Rate ($/pound) 1.5037 1.4675 1.6289 1.4624 1.5176

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

Year 0

Free cash flow (millons of pounds) _______

Forward exchange rate ________

Free cash flow (millons of dollars) ________

Sales in the US (millons of dollars) ________

Cash flow (millons of dollars) ________

NPV of investemnt _____

Data Table SPREADSHEET 2 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 37.500 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 PrintDone