Use the second recipe (second picture) to find out the adjusted present value of this project in $. Should the firm accept or reject? Show all the steps you think necessary.

(25 points) Subsandwich Inc. is a U.S. company that is considering expanding its operations into Japan. Subsandwich has located a possible site for a Japanese subsidiary in Tokyo. The cost to purchase and equip the facility is 765,000,000. Perform an adjusted present value (APV) analysis to determine whether this is a good investment, under the following assumptions: Economic life is 10 years. The terminal value is 65 million. The firm will take a straight-line depreciation for these 10 years. Net working capital will average 6% of total sales revenue. The Japanese corporate income tax rate is 37.5%. The average per-unit sales price will initially be 400. First-year sales will be 15 million units, and sales will then grow at 10% per annum for the next 3 years, 5% per annum for the 3 years after that, and then stabilize at 3% per annum afterwards. First-year variable costs of production will be 225 per unit of labor and $1.75 per unit of imported parts. Administrative costs will be 300 million. Retail prices, labor costs, and administrative expenses are expected to rise at the Japanese yen rate of inflation, which is forecast to be 1% annually. Dollar prices of imported parts are expected to rise at the U.S. dollar rate of inflation, which is expected to be 4% annually. The yen/dollar exchange rate is currently So(/$) = 85. The yen-denominated unlevered equity discount rate for the project is 13% annually. The firm decides to borrow 300 million to finance the project, and the yen-denominated borrowing rate for the project is 6% annually. Another recipe for international decision makers: O Estimate future cash flows in foreign currency. e Estimate the foreign currency discount rate. Calculate the foreign currency NPV using the foreign cost of capital. O Translate the foreign currency NPV into dollars using the spot exchange rate (25 points) Subsandwich Inc. is a U.S. company that is considering expanding its operations into Japan. Subsandwich has located a possible site for a Japanese subsidiary in Tokyo. The cost to purchase and equip the facility is 765,000,000. Perform an adjusted present value (APV) analysis to determine whether this is a good investment, under the following assumptions: Economic life is 10 years. The terminal value is 65 million. The firm will take a straight-line depreciation for these 10 years. Net working capital will average 6% of total sales revenue. The Japanese corporate income tax rate is 37.5%. The average per-unit sales price will initially be 400. First-year sales will be 15 million units, and sales will then grow at 10% per annum for the next 3 years, 5% per annum for the 3 years after that, and then stabilize at 3% per annum afterwards. First-year variable costs of production will be 225 per unit of labor and $1.75 per unit of imported parts. Administrative costs will be 300 million. Retail prices, labor costs, and administrative expenses are expected to rise at the Japanese yen rate of inflation, which is forecast to be 1% annually. Dollar prices of imported parts are expected to rise at the U.S. dollar rate of inflation, which is expected to be 4% annually. The yen/dollar exchange rate is currently So(/$) = 85. The yen-denominated unlevered equity discount rate for the project is 13% annually. The firm decides to borrow 300 million to finance the project, and the yen-denominated borrowing rate for the project is 6% annually. Another recipe for international decision makers: O Estimate future cash flows in foreign currency. e Estimate the foreign currency discount rate. Calculate the foreign currency NPV using the foreign cost of capital. O Translate the foreign currency NPV into dollars using the spot exchange rate