Wenceslas Refining Company. Privately owned Wenceslas Refining Company is considering investing in the Czech Republic so as to have a refinery source closer to its European customers. The original investment in Czech korunas would amount to CZK240 million, at the current spot rate of CZK32.50/$, all in fixed assets, which will be depreciated over 10 years by the straight-line method. An additional CZK100,000,000 will be needed for working capital.For capital budgeting purposes, Wenceslas assumes sale as a going concern at the end of the third year at a price, after all taxes, equal to the net book value of fixed assets alone (not including working capital). All free cash flow will be repatriated to the United States as soon as possible. In evaluating the venture, the U.S. dollar forecasts are shown in the popup table, .

Assumptions	0	1	2	3
Original investment (Czech korunas, CZK)	CZK240,000,000
Spot exchange rate (CZK/$)	32.50	29.50	27.50	25.00
Unit demand		700,000	800,000	1,100,000
Unit sales price		$11.50	$11.90	$12.40
Fixed cash operating expenses		$1,200,000	$1,250,000	$1,300,000
Investment in working capital (CZK)	CZK100,000,000

Variable manufacturing costs are expected to be 45% of sales. No additional funds need be invested in the U.S. subsidiary during the period under consideration. The Czech Republic imposes no restrictions on repatriation of any funds of any sort. The Czech corporate tax rate is 24%cand the United States rate is 40%. Both countries allow a tax credit for taxes paid in other countries. Wenceslas uses 17% as its weighted average cost of capital, and its objective is to maximize present value.

a. Is the investment attractive to Wenceslas Refining from the project's viewpoint?

b. Is the investment attractive to Wenceslas Refining from the parent's viewpoint?

a. Calculate the free cash flow for year 0 from the project's viewpoint below:(Round to the nearest dollar.)

Project Viewpoint ($)		Year 0		Year 1		Year 2		Year 3
Initial investment	$
Unit sales price			$	11.50	$	11.90	$	12.40
Unit demand				700,000		800,000		1,100,000
Revenues
Less costs of manufacturing
Gross profit
Less fixed cash operating expenses				(1,200,000)		(1,250,000)		(1,300,000)
Less depreciation
Earnings before taxes
Less Czech corporate income taxes (24%)
Net income
Add back depreciation
Less additional working capital investment
Sale value
Free cash flows for discounting	$

Calculate the free cash flow for year 1 from the project's viewpoint below:(Round to the nearest dollar.)

Calculate the free cash flow for year 2 from the project's viewpoint below:(Round to the nearest dollar.)

Calculate the free cash flow for year 3 from the project's viewpoint below:(Round to the nearest dollar.)

The net present value on this investment from the project's viewpoint is $enter your response here. (Round to the nearest dollar.)

From the project's viewpoint, Wenceslas Refining should accept/reject the investment project because its NPV is negative/positive

b. Calculate the free cash flow for year 0 from the parent's viewpoint below:(Round to the nearest dollar.)

Calculate the free cash flow for year 1 from the parent's viewpoint below:(Round to the nearest dollar.)

Calculate the free cash flow for year 2 from the parent's viewpoint below:(Round to the nearest dollar.)

Calculate the free cash flow for year 3 from the parent's viewpoint below:(Round to the nearest dollar.)

The net present value on this investment from the parent's viewpoint is $enter your response here. (Round to the nearest dollar.)

From the parent's viewpoint, Wenceslas Refining should accept/reject the investment project because its NPV is positive/ negative