Question No-1 2.5*4=10

Sainsburry Co., based in Alabama, USA considers several international opportunities in Europe that could affect the value of its fi rm. The valuation of its firm is dependent on four factors: (1) expected cash flows in dollars, (2) expected cash flows in euros that are ultimately converted into dollars, (3) the rate at which it can convert euros to dollars, and (4) Sainsburrys weighted average cost of capital. For each opportunity, identify the factors that would be affected.

a)Sainsburry plans a licensing deal in which it will sell technology to a firm in Germany for $3 million; the payment is invoiced in dollars, and this project has the same risk level as its existing businesses.

b)Sainsburry plans to acquire a large firm in Portugal that is riskier than its existing businesses.

c)Sainsburry plans to discontinue its relationship with a U.S. supplier so that it can import a small amount of supplies (denominated in euros) at a lower cost from a Belgian supplier.

d)Sainsburry plans to export a small amount of materials to Ireland that are denominated in euros