Switzerland and sells it in the Eurozone. At the beginning of 2015, the exchange rate between the euro and the Swiss franc (Fr) is Fr1.20/C. The expected cash flows (the baseline case) from the Swiss subsidiary for the next five years are presented in the table below. Assumptions 2015 2016 2017 2018 2019 Sales volume (units) 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Sales price per unit Fr. 12.80 Fr. 12.80 Fr. 12.80 Fr. 12.80 Fr. 12.80 Direct cost per unit Fr. 9.60 Fr. 9.60 Fr. 9.60 Fr. 9.60 Fr. 9.60 Swiss corporate tax rate 29.5% 29.5% 29.5% 29.5% 29.5% Exchange rate (Fr/C) 1.2000 1.2000 1.2000 1.2000 1.2000 Income Statement 2015 2016 2017 2018 2019 Sales revenue Fr. 12,800,000 Fr. 12,800,000 Fr. 12,800,000 Fr. 12,800,000 Fr. 12,800,000 Direct cost of goods sold -9,600,000 -9,600,000 -9,600,000 -9,600,000 -9,600,000 Cash operating expenses (fixed) -890,000 -890,000 -890,000 -890,000 -890,000 Depreciation -600,000 -600,000 -600,000 -600,000 -600,000 Pretax profit Fr. 1,710,000 Fr. 1,710,000 Fr. 1,710,000 Fr. 1,710,000 Fr. 1,710,000 Income tax expense -504,450 -504,450 -504,450 -504,450 -504,450 Net income Fr. 1,205,550 Fr. 1,205,550 Fr. 1,205,550 Fr. 1,205,550 Fr. 1,205,550 Operating Cash Flows Nct incomc Fr. 1,205,550 Fr. 1,205,550 Fr. 1,205,550 Fr. 1,205,550 Fr. 1,205,550 Add back depreciation 600,000 600,000 600,000 600,000 600,000 Changes in net working capital 0 0 0 0 Cash flow from operations Fr. 1,805,550 Fr. 1,805,550 Fr. 1,805,550 Fr. 1,805,550 Fr. 1,805,550 Cash flow from operations, in euro E 1,504,625 E 1,504,625 1,504,625 E 1,504,625 1,504,625 Present Value @ 15% E 5,043,736 Assume that the subsidiary has no change in net working capital. Cash operating expenses and depreciation are given. Cost of capital remains constant