Please help me with the following:

All HW submissions must be done using Microsoft Excel.

Don't use Excel as a word processor. You have to use Excel to actually calculate numeric results. Nevertheless, to show the procedure used, please identify the names of your variables (both input and output).

Highlight or put a box around your main answers

Use one sheet for each problem

A U.S.-based firm is considering a five- year project in Colombia. The following information is available about the project:

Initial investment. The initial investment of USD 750,000 is used to purchase capital equipment. This equipment will be depreciated straight line to zero. At the end of five years, the remaining equipment will be sold for Colombian Peso (COP) 12,000,000.

Working capital. The investment in working capital is COP 180,000,000. There are no changes in working capital until the end of the project when the full amount is recovered.

Units, price, and costs. The firm will produce 1750 units of a product annually. The selling price is expected to be COP 599000 in the first year. This price is expected to increase at a rate of 3 percent annually. The direct expense per unit is expected to be COP 240000 in the first year. This is expected to increase at a rate of 7 percent annually. Indirect expenses are expected to be COP 75,000,000 annually. Taxes and miscellaneous. Colombian taxes on income and capital gains are 33 percent. There are no additional withholding taxes. All cash flows are repatriated when generated, and there are no additional

U.S.taxes. The parity conditions are assumed to hold between Colombia and the United States. The

relevant inflation indexes indicate a rate of 2.5 percent for the United States and 6 percent for Colombia. Spot USDCOP equals 2900. Brady's USD denominated WACC is 12.5 percent.

a.Calculate COP cash flows.

b.What is the appropriate COP discount rate? Calculate the project NPV.

c.Use parity conditions to generate future spot rates. Calculate the project NPV in USD.

d.Calculate break- even units.

e.Now assume that the COP rate of annual depreciation doesn't follow parity conditions. What is the break- even rate of depreciation in COP? Assuming the USD inflation is unchanged, what is the COP inflation rate consistent with this break- even depreciation?