Using the Trident analysis in Exhibits 11.5 and 11.6 where the Euro depreciates, answer the following questions:

1. How would prices, costs, and sales volume change if Trident Germany was operating in a nearly purely domestic mature market with major domestic competitors?

2. Now assume that Trident Germany is now competing in a number of international export markets where most competitors are foreign. Now how would you expect the firms operating exposure to respond to the depreciation of the euro?
3. 

Exhibit 11.5 Trident Germany's Valuation: Baseline Analysis 2015 Assumptions Sales volume (units) Sales price per unit Direct cost per unit German corporate tax 2014 1,000,000 12.80 9.60 29.5% 1,000,000 12.80 9.60 29.5% 2016 1,000,000 12.80 9.60 29.5% 2017 1,000,000 12.80 9.60 29.5% 2018 1,000,000 12.80 9.60 29.5% rate 1.2000 2014 12,800,000 -9,600,000 1.2000 2015 12,800,000 -9,600,000 1.2000 2016 12,800,000 -9,600,000 1.2000 2017 12,800,000 -9,600,000 1.2000 2018 12,800,000 -9,600,000 - 890,000 -890,000 -890,000 - 890,000 - 890,000 -600,000 -600,000 1,710,000 -504,450 1,205,550 Exchange rate ($/) Income Statement Sales revenue Direct cost of goods sold Cash operating expenses (fixed) Depreciation Pretax profit Income tax expense Net income Cash Flows for Valuation Net income Add back depreciation Changes in net work ing capital Free cash flow for valuation, in euros Cash flow from opera tions, in dollars Present Value @ 15% 1,710,000 -504,450 1,205,550 -600,000 1,710.000 -504,450 1,205,550 -600,000 1,710,000 -504,450 -600,000 1,710,000 -504,450 1,205,550 1,205,550 1,205,550 600.000 0 1,205,550 600,000 0 1,205,550 600.000 0 1,205,550 600.000 0 1,205,550 600,000 0 1,805,550 1,805,550 1,805,550 1,805,550 1,805,550 $2,166,660 $2,166,660 $2,166,660 $2,166,660 $2,166,660 $7,262,980 Sale Exhibit 11.6 Trident Germany: Case 4 Price, Volume & Cost Increase 2014 1,100,000 14.08 10.00 29.5% 2015 1,100,000 14.08 10.00 29.5% 2016 1,100,000 14.08 10.00 29.5% 2017 1,100,000 14.08 10.00 29.5% 2018 1,100,000 14.08 10.00 29.5% Assumptions Sales volume (units) Sales price per unit Direct cost per unit German corporate tax rate Exchange rate ($/) Income Statement Sales revenue Direct cost of goods sold Cash operating expenses (fixed) Depreciation Pretax profit Income tax expense Net income Cash Flows for Valuation 1.0000 2014 15,488,000 - 11.000.000 1.0000 2015 15,488,000 -11,000,000 1.0000 2016 15,488,000 -11,000,000 1.0000 2017 15,488,000 - 11.000.000 1.0000 2018 15,488,000 - 11,000,000 -890.000 -890,000 -890,000 -890,000 -890,000 -600,000 2.998,000 -884,410 -600,000 2.998,000 -884,410 -600,000 2,998.000 -884,410 -600,000 2.998,000 -884,410 -600,000 2.998,000 -884,410 2,113,590 2,113,590 2,113,590 2,113,590 2,113,590 2.113,590 600,000 2,113,590 600,000 2.113,590 600,000 2,113,590 600,000 2.113,590 600,000 -89.907 o 0 o Net income Add back depreciation Changes in net work- ing capital Free cash flow for valuation, in euros Cash flow from opera- tions, in dollars Present Value @ 15% 2,623,683 2,713,590 2,713,590 2,713,590 2,713,590 $2.623,683 $2.713,590 $2.713,590 $2.713,590 $2.713,590 $9.018,195