Valuation of Foreign Investment Project Suppose Oak Tree, Inc., a U.S. manufacturer of custom packaging products wants to value a project of introducing a new packaging line in the U.K. The project is completely self-contained in the U.K., such that all revenues and expenses are incurred there. Sales revenue is expected to be 42.5 million per year for four years. COGS is expected to total 20 million per year. Operating expenses are expected to be 8 million per year. Developing the product will require an upfront investment of 15 million in capital equipment that will be obsolete in four years. Initial marketing expense is 5 million. Corporate tax rate is 40% in both U.S. and U.K. Oak Tree's capital structure is as follows: debt 300million, equity =200 million, cost of debt-6%, cost of equity-10%. Suppose that: the current spot exchange S = $2/, the risk-free rate on dollars r(S) = 4%, and the risk-free rate on pounds r() = 7%. Should Oak Tree undertake this project? Solve this problem in TWO ways! (a) First convert each period's foreign cash flows into domestic currency, then discount to its present value. (b) First discount the foreign cash flows then covert this result to a domestic NPV.