You are International Business Manager at a UK based company. Considering high demand your company plans a full-scale expansion. Your company has identified USA and Europe as potential markets. You are requested to analyse both projects and advise. In considering such large project, you must work out the risk of each project, cost of capital and NPV. Allocate discount rate for each project accordingly and justify why you allocated this rate in your discussion. Discuss how international risks can be managed.

Projected cash flows in respective currencies: Year Net Cash Flow USD

USA

Net Cash Flow - EUR Europe 0 -20 million -20 million 1 2 million 2 million 2 4 million 3 million 3 5 million 4 million 4 6 million 8 million 5 8 million 8 million Instructions:

a. Discuss viability of both projects in todays global business context and allocate discount rate. (10 Marks) b. How much investment is needed for each project and what is the NPV of each project? (20 Marks) c. Discuss your calculations and advise which project should be selected. (10 Marks) d. Considering current world economic climate, the future exchange rates are uncertain. How would you analyse/anticipate the change in exchange rates? Write your proposal to mitigate impact of possible exchange rate fluctuations