Mama Mia Group, an Italian shoes manufacturer is considering moving some of its operations Since majority of the shoes are exported to Norway, the Italian company wants to open a manufacturing facility there with two year project period with initial cost of EUR400,000 The operations in Norway would begin in Year 1 and have the following details (Note NOK is a currency code for Norwegian Kroner) Assumptions Value Sales, Year 1 (NOK) 7,000,000 Annual growth of sales 3 00 Variable Cost, Year 1 (NOK) 300,000 Annual growth of variable cost 5 00 Depreciation expenses per year (NOK) 150,000 Mama Mias WACC 10 00 Corporate Tax in Italy 20 Corporate Tax in Norway 22 Remittance Tax in Italy 2 Remittance Tax in Norway 3 Spot Rate, Year 0 NOK10 EUR The operations in Norway will pay 70 of its accounting profit to Mama Mia Group as an annual cash dividend Long run inflation is forecasted to be 2 per annum in the Norway and 4 in Italy Assume that the purchasing power parity hold, calculate the NPV in EUR of this project from the perspective of parent company

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Mama Mia Group, an Italian shoes manufacturer is considering moving some of its operations. Since majority of the shoes are exported to Norway, the Italian

Mama Mia Group, an Italian shoes manufacturer is considering moving some of its operations. Since majority of the shoes are exported to Norway, the Italian company wants to open a manufacturing facility there with two-year project period with initial cost of EUR400,000. The operations in Norway would begin in Year 1 and have the following details.

(Note: NOK is a currency code for Norwegian Kroner)

Assumptions		Value
Sales, Year 1 (NOK)		7,000,000
Annual growth of sales		3.00%
Variable Cost, Year 1 (NOK)		300,000
Annual growth of variable cost		5.00%
Depreciation expenses per year (NOK)		150,000
Mama Mias WACC		10.00%
Corporate Tax in Italy		20%
Corporate Tax in Norway		22%
Remittance Tax in Italy		2%
Remittance Tax in Norway		3%
Spot Rate, Year 0		NOK10/EUR

The operations in Norway will pay 70% of its accounting profit to Mama Mia Group as an annual cash dividend. %. Long-run inflation is forecasted to be 2% per annum in the Norway and 4% in Italy. Assume that the purchasing power parity hold, calculate the NPV in EUR of this project from the perspective of parent company.