Question
If you could please help with these problems so i can compare my work that would be lovely Wisconsin Wine and Wurst (U.S.) expects to
If you could please help with these problems so i can compare my work that would be lovely
Wisconsin Wine and Wurst (U.S.) expects to receive cash dividends from a Germany joirt venture over the coming five years. The first dividend, to be paid in one year expected to be 420,000. The dividend is then expected to remain flat for four additional years. The current exchange rate (December 4, 2018) is $1.25/E.3W's weighted average cost of capital is 9%
a. What is the present value of the expected euro dividend stream if the euro is expected to appreciate 6.00% per annum against the dollar?
b. What is the present value of the expected dividend stream if the euro were to depreciate 7.00% per annum against the dollar?
Bankers Club Bankers Club Co. wants to invest in a project in Poland to make rum. Bankers Club would require an initial investment of 7,000,000 zloty. It is expected to generate cash flows of 9,000,000 zloty at the end of one year. The spot rate of the zloty is $.30, and Bankers Club thinks this exchange rate is the best forecast of the future. However, there are 2 forms of country risk.
First, there is a 12% chance that the Polish government will require that the zloty cash flows earned by Bankers Club at the end of one year be reinvested in Poland for one year before it can be remitted (so that cash would not be remitted until 2 years from today). In this case, Bankers Club would earn 1% after taxes on a bank deposit in Warsaw during that second year.
Second, there is a 40% chance that the Poland will impose a special remittance tax of 420,000 zloty at the time that Bankers Club Co. remits cash flows earned in Poland back to the U.S
Assume that the two forms of country risk are independent. The required rate of return on this project is 16%. There is no salvage value, what is the expected value of the project's net present value? What is your recommendation to Bankers Club Co?
Brower, Inc. just constructed a manufacturing plant in Ghana. The construction cost 9 billion Ghanian cedi. Brower intends to leave the plant open for three years. During the three years of operation cedi cash flows are expected to be 3 billion cedi, 3 billion cedi, and 2 billion cedi, respectively. Operating cash flows will begin one year from today and are remitted back to the nt at the end of each year. At the end of the third year, Brower expects to sell the plant for 5 pare billion cedi. Brower has a required rate of return of 17 percent. It currently takes 8,700 cedi to buy one U.S. dollar, and the cedi is expected to depreciate by 5 percent per year.
Determine the NPV for this project. Should Brower build the plant?
How would your answer change if the value of the cedi was expected to remain value of 8,700 cedis per U.S. dollar over the course of the three years? Should Brower construct the plant then?
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