Etemadi Amalgamated, a U.S. manufacturing firm, is considering a new project in the euro area. You are in Etemadi's corporate finance department and are responsible for deciding whether to undertake the project. The free cash flows, in euros, are forecast to be the following:

Year		Free Cash Flow (. million)
0		-15
1		9
2		10
3		11
4		12

You know that the spot exchange rate is S=$1.1500/. In addition, the risk-free interest rate on dollars is

4.0%, and the risk-free interest rate on euros is 6.0% (and the yield curve is flat in both currencies).

Assume that these markets are internationally integrated and the uncertainty in the FCFs is not correlated with uncertainty in the exchange rate. You determine that the dollar WACC for these cash flows is

8.5%.

a. What is the dollar present value of the project? Should Etemadi Amalgamated undertake the project?

b. Assume that the spot rate is now S=$0.8500/, about 26% lower. What is the new present value of the project in dollars? What is the new present value of the project in dollars? Should Etemadi Amalgamated undertake the project?

Hint: Make sure to round all intermediate calculations to at least four decimal places.

For B: The Forward exchange rates for year 1, 2, 3, and 4 is $__/ (Round to four decimal places.)

Next, you need to find the expected cash flow of the project.

The expected dollar cash flow of for year 0, 1, 2, 3, and 4 is $__million (round to 4 decimal places)

Finally, calculate the net present value

The dollar present value of the project is $__ million

Should Etemadi Amalgamated undertake the project?