I just need the following questions answered. Using the attached documents. Consider the exposure (delta) of Jaguar to the $/ rate for a U.S. investor rather than a U.K. investor. Is the exposure to the dollar-based owners the same as that of the pound-based investors above? Why or why not?

The Florida International University College of Business Administration FIN4604: International Financial Management Spring 2015 Dr Q. Kang General Instructions on Project The project analysis is due April 25, Saturday, 11:59pm. Each group needs to submit only one written copy of the project analysis using the Blackboard's Assignment Dropbox. Write down each group member's name on the front page of the report. I will grade each group's project analysis according to the Rubrics posted in the Blackboard. Each member of the group will receive the same grade. Groups will be formed by the professor within one week after this instruction is distributed. Each group typically consists of four students. Please check the Grade Center at the Blackboard to find out your group members. Note that you are responsible for setting up a scheme to coordinate each group member's efforts on this project. Free-riders are NOT welcome. The group can vote with a majority to kick the free-rider out of his/her group - in that case, the one who is kicked out will receive zero grade on the project. You may find it useful to take a look at the slides: \"jaguar_introduction.ppt\Introduction to the Jaguar Case In 1984, British government wants to privatize Jaguar, but what is a proper value? Description of luxury car market and Jaguar's recent results. The problem that a high dollar presents. A stab at valuation -- Price/earnings for German competitors. Two exchange rate scenarios. Review of valuation Calculation of delta A General Valuation Framework Steps involved in the valuation: - Step 1: Estimate the free cash flows of an unlevered firm or project - Step 2: Discount the unlevered cash flow with the WACC This is the value VL of the levered firm - Step 3: Subtract the value of debt to get the value of equity VE =VL - D 9 Estimating Free Cash Flows Estimating the free cash flows of an unlevered firm or project: earnings before interest and taxes (EBIT) - taxes = earnings before interest and after taxes (i.e., EBIAT= EBIT( 1 - C)) + depreciation = operating cash flows - capital expenditures - investment in working capital =total free cash flow to unlevered firm 10 Applying the valuation framework to the Jaguar case To find a value for Jaguar, must start with free cash flows = profits after tax + depreciation - increase in working capital - capital expenditure Then take present value of these free cash flows. Finally, subtract long term debt. Notes on Jaguar Example: If Jaguar has 50 million in free cash flows every year no debt and if its discount rate is 18 %, then its value is 50 million / 0.18 = 278 million If 50 million is the free cash flow this year and if it grows at 5 % per year, then its value is 50 million / (0.18 - 0.05) = 385 million What if we try to project actual cash flows for Jaguar for the next five years? What do we do with cash flows beyond this horizon? Answer: Form a terminal value of Jaguar based on some assumption about cash flows thereafter