(TAB 1) *[Must use instructions in cell A41 to complete]

1) What is the company?s euro WACC?

2) What is the present value of the project in euro?

Project Value:

Undertake Project? Yes or No

(TAB 2)

1) What is the market profit or loss that you will have each date?

2) What is your total profit or loss after ten days?

3) What is the largest cumulative loss over the 10 days?

**[Must use the instructions in A68 cell to complete.]

Tutor, please do not attempt if you do not use the instructions in the given instruction cells. Thank you.

Problem 31-8 Manzetti Foods, a U.S. food processing and distribution company, is considering an investm in the euro area. You are in Manzetti's corporate finance department and are responsible for deciding whether to undertake the project. The expected free cash flows, in euros, are uncorrelated to the spot exchange rate and are shown here: Year 0 1 2 3 4 Free Cash Flow (EUR million) -25 12 14 15 15 The new project has similar dollar risk to Manzetti's other projects. The company knows tha overall dollar WACC is 9.5%, so it feels comfortable using this WACC for the project. The r free interest rate on dollars is 4.5% and the risk-free interest rate on euros is 7%. a. Manzetti is willing to assume that capital markets in the United States and the euro ar are internationally integrated. What is the company's euro WACC? b. What is the present value of the project in euros? Risk-free rate on USD Risk-free rate on EUR Year 0 1 2 3 4 US WACC 4.50% 7.00% Free Cash Flow (EUR million) (25.00) 12.00 14.00 15.00 15.00 9.50% a. Manzetti is willing to assume that capital markets in the United States and the euro ar are internationally integrated. What is the company's euro WACC? Euro WACC b. What is the present value of the project in euros? Project value (million EUR) Undertake project? Requirements 1. In cell E33, calculate the euro WACC. To calculate the euro WACC use the following form WACC_EUR = (1 + WACC_USD) * (1 + r_EUR)/(1 + r_USD) - 1. (1 point.) 2. To calculate the project value, you will use the function NPV. In cell E37, input the function 3. To decide on the attractiveness of the project, you need to assess the value of the project by In cell E38, if the project value, cell E37, is larger than 0; show Yes; otherwise display onsidering an investment nd are responsible for ws, in euros, are e company knows that its C for the project. The riskros is 7%. States and the euro area CC? States and the euro area CC? se the following formula: (1 point.) E37, input the function NPV. (1 point.) alue of the project by using the function IF. therwise display No. (1 point.) Problem 30-6 Your utility company will need to buy 100,000 barrels of oil in ten days time, and it is worri you go long 100 oil futures contracts, each for 1000 barrels of oil, at the current futures pric futures prices change each day as follows: 63 62 $61.75 Future Price ($/bbl) 61 $60.75 $60.50 60 $60.00 $59.50 $59.75 $59.50 59 58 $58.00 $57.75 $57.50 57 0 1 2 3 4 5 6 7 8 9 Day a. What is the mark-to-market profit or loss (in dollars) that you will have on each date? b. What is your total profit or loss after ten days? Have you been protected against a rise c. What is the largest cumulative loss you will experience over the ten-day period? In w problem? Position (long contracts) Contract (barrels) Current price 100 1,000 $60.00 a. What is the mark-to-market profit or loss (in dollars) that you will have on each date? Day 0 1 2 3 4 5 6 7 Price ($) 60.00 59.50 57.50 57.75 58.00 59.50 60.50 60.75 Gain/Loss ($) 8 9 10 59.75 61.75 62.50 b. What is your total profit or loss after ten days? Have you been protected against a rise Total Protected? c. What is the largest cumulative loss you will experience over the ten-day period? In w problem? Day 0 1 2 3 4 5 6 7 8 9 10 Gain/Loss ($) Cumulative ($) Largest cumulative loss This loss would be a problem if you had to liquidate that day.\" Requirements 1. In cell F31, by using cell references, calculate the profit or loss for day 1. Hint: Use absolute cell reference on cells E22 and E23 in order to get cell F31 ready to be c Copy and paste cell F31 onto cells F32:F40. (2 points.) 2. In cell E44, calculate the total profit or loss by using the function SUM. (1 point.) To see whether you have been protected against a rise in oil prices, you need to assess wheth 3. by using the function IF. In cell E45, input the function IF to compare whether the total profit (or loss) is greater than greater than zero, otherwise show NO. (1 point.) 4. To calculate the largest daily cumulative loss, you need to calculate the daily cumulative gai In cell F52, calculate the cumulative gain or loss for day 1 by making a cell reference to the E52. (1 point.) In cell F53, calculate the cumulative gain or loss for day 2 by adding the profit or loss for da 5. or loss for day 1. Copy and paste cell F53 onto cells F54:F61. (2 points.) 6. To find the largest daily cumulative loss, in cell E63, use the function MIN. (1 point.) ten days time, and it is worried about fuel costs. Suppose il, at the current futures price of $60 per barrel. Suppose $62.50 $61.75 $60.75 $60.50 $59.75 6 7 8 9 10 you will have on each date? been protected against a rise in oil prices? ver the ten-day period? In what case might this be a you will have on each date? been protected against a rise in oil prices? ver the ten-day period? In what case might this be a for day 1. to get cell F31 ready to be copied onto cell F32 to F40. n SUM. (1 point.) ces, you need to assess whether you experienced a total profit or loss profit (or loss) is greater than 0, and show YES if total profit is late the daily cumulative gain or loss. aking a cell reference to the profit or loss for day 1, cell dding the profit or loss for day 2, and the cumulative gain 2 points.) nction MIN. (1 point.)