AutoSave . OFF A B ? CG ... Finance Prompt Q Home Insert Draw Design Layout References Mailings Review View Acrobat Picture Format . Tell me Share Comments Calibri (Bo... ~ 12 AA Aav AaBbCcDdEe AaBbCcDdEe AaBbCcDc AaBbCcDdE AaBb( AaBbCcDdEE AaBbCcDdEe AaBbCcDdEe AaBbCcDdEe AaBbCcDdEe AaBbCcDdEe CE Paste BIUvab x x|A DAY Norma No Spacing Heading 1 Heading 2 Subtitle Subtle Emph Emphasis Intense Emp.. Strong Quote styles Dictate Create and Share Request Pane Adobe PDF Signatures You just started a new job as a Finance Manager at XYZ Corp. As you are starting to get acquainted with the company, you requested the Balance Sheet for the Current Fiscal Year 2018, the Income Statement and a few other items that you deemed appropriate. You can find all of those in the table below and in the Excel file attached Income Statement for the Current Fiscal Year Sales $43,000,000 COGS 000,000 Other expenses $5,000,000 Depreciation $2,000,000 EBIT $6,000,000 Interest $2,000,000 Taxable income $4,000,000 Taxes (40%) $1,600,000 Net income $2,400,000 Dividends $600,000 Add to RE $1,800,000 Balance Sheet, Current Fiscal Year Assets Liabilities & Owners' Equity Current Assets Current Liabilities Cash $500,000 Accounts Payable $1,000,000 Accounts Receivable $1,000,000 Notes Payable $3,000,000 Inventory $2,000,000 Total CL $4,000,000 Total CA $3,500,000 Long Term Debt $10,000,000 Fixed Assets Owners' Equity Net PP&E $25,000,000 Common Stock $6,500,000 Retained Earnings $8,000,000 Total Equity $14,500,000 Total Assets $28,500,000 Total L & OE $28,500,000 Additional information Taxes 10% Market-to-Book Ratio 1.25 Shares Outstanding 1,000,000 Depreciation of New Assets 25.00% Dividend growth in the last 7 years 8.00% Note: The Market-to-Book Ratio is equal to the Market Value per Share divided by the Book Value per Share. The Book Value per Share is the Total Owners' Equity divided by the number of outstanding shares. This and other financial statements ratios can be found on Chapter 3 in the textbook. Page 1 of 1 0 words English (United States) Focus E 160%Home Insert Draw Design Layout References Mailings Review View Acrobat ? Tell me Share Comments Calibri (Bo... ~ 12 AA Aav AaBbCcDdEe AaBbCcDdEe AaBbCcDc AaBbCcDdE AaBb( AaBbCcDdEe AaBbCcDdEe AaBbCcDdEe AaBbCcDdEe AaBbCcDdEe AaBbCcDdEe Paste BIU ab x x|A DAY Norma No Spacing Heading 1 Heading 2 Title Subtitle Subtle Emph Emphasis Intense Emp... Strong Quote styles Dictate Create and Share Request Pane Adobe PDF Signatures Finance Q5 Question 5. XYZ Corp is considering expanding to Europe and starting a project that costs E6M and is expected to generate E1.5M in year 1, E2.0M in year 2, and E2.5M in year 3. The current spot exchange rate is $1.13/E, the US risk-free rate is 2.5%, and the risk-free rate in Europe is 2.1%. Because this is a significantly riskier project than the domestic ones, it was estimated that the cost of capital is 15%. According to a recent market study commissioned by XYZ Corp, it's believed that the European subsidiary can be sold at the end of the project for E5M. (a) What are the pros and cons of an international project? What additional risks will the company likely face? (b) What is the NPV of the project? (c) What happens to the profits from the international project if the dollar strengthens? What if it weakens? How could the company hedge the exchange rate risk? Page 1 of 1 0 words English (United States) Focus To E 210%