Tommy Turtle Hats is a firm creating hats for turtles. They have headquarters in Florida, but they want to open up production and start selling in Norway. Information needed is given below.

A) Therefore, they buy property plant and equipment (PP&E) today for NOK 10,000. They will depreciate it straight line over 4 years (the life of the project). They will then be able to sell the PP&E for NOK 3,000 at the end of year 4. The tax rate in Norway is 22%, the same as the US and the two countries have an agreement where taxes paid in one count for taxes paid in the other (aka only pay tax in Norway). Net working capital needed today is NOK 1,000 and will be recovered in full at final year of project.

B) The current spot exchange rate is 8.68 NOK/USD. The expected inflation in the US is 3% for 1 year and 4% in Norway for 1 year. The inflation in year 2, 3 and 4 will be level between the countries (both at 3%).

C) The firm has a beta of 1.2, the risk-free rate is 3%, and the expected return of the market is 9%. The firm has bonds with 5 years to maturity, paying a 4% annual coupon, with a face value of $1000, currently trading at $980. The value of equity for the firm is $10 million and the value of debt for the firm is $10 million. Tax rate is 22%.

Things to do: Fill in all the blank space with correct information. Show calculated work for WACC and exchange rates on next pages.