Present Value Calculations

• Your Electric Sportscar companyRacing Edison Motorcraft (REM)is growing fast. As a manager you are tasked with making a recommendation to the board about which overseas market to expand into firstthe U.K., Germany or Spain. Your researchers have developed the information in the table below which gives projections for Units Sold, Total Revenues, and Profits for the 3 different countries over the critical first 3 years in the market.
• The Finance department has estimated the best alternative use of the funds being used for this expansion, is an investment in a joint partnership with a Chinese motorbike manufacturer, that they estimate would generate net returns of 20% a year. The market interest rate is 5%.

	Units Sold (thousands)			Total Revenue ($millions)			Profits ($millions)
Country	Yr1	Yr2	Yr3	Yr1	Yr2	Yr3	Yr1	Yr2	Yr3
U.K.	3.5	4.1	6.2	175	205	310	2.6	6.7	13.6
Germany	4.4	4.3	4	286	279.5	260	7.2	6.8	6.5
Spain	2.8	3.1	5.3	112	124	212	4.8	7.8	6.1

1. Explain what Discount you will be using in your Present Value calculationsand explain why you are using this value? Note here if you will be using the Table method for Present Value calculation.
2. Explain what Variables (Units Sold, Total Revenues, or Profits) Present Value you will be calculating to base your recommendation on, and why.
3. Calculate the Total Present Value of the U.K. option
4. Calculate the Total Present Value of the Germany option
5. Calculate the Total Present Value of the Spain option
6. Rank the alternatives--which option would you recommend to the REM board? How much better is it for the firm in percentage terms than the next best alternative?