Privately owned Atlas Petroleum Company is considering investing in France to have a refinery source closer to its European customers. The following assumptions are being considered.

Assumptions	Year 0	Year 1	Year 2	Year 3
Original Investment (francs, Fr)	25,000,000
Spot exchange rate (Fr/$)	32.50	30.00	27.50	25.00
Unit demand		700,000	900,000	1,000,000
Sales price per unit (Fr)		10.00	10.30	10.60
Cash operating expenses (Fr)		1,000,000	1,030,000	1,060,000
Depreciation (Fr)		500,000	500,000	500,000
Investment in working capital (F)	10,000,000

Other Assumptions:

1. After year 3, Atlas Petroleum expects the refinery to grow by 10% per year in perpetuity. HINT: Compute the terminal value in year 3 for both the project and Atlass investment using the perpetual model. The models are provided in your Lecture slides.
2. Since Atlas Petroleum expects the refinery to operate in perpetuity, there is no expectation to recover the investment in working capital.
3. Variable manufacturing costs are expected to be 50% of sales.
4. The France corporate income tax rate is 25% and the United States corporate income tax rate is 30%.
5. The France refinery will pay dividends equal to 50% of net income to Atlas Petroleum. Atlas Petroleum will be required to pay taxes in the United States on any dividend income received.
6. Atlas Petroleum uses a weighted average cost of capital of 18%.

Required:

1. Compute the France refinerys NPV and IRR and determine whether it is an attractive investment.
2. Compute the NPV and IRR of Atlas Petroleums investment and determine whether it is worthwhile.