Question

Victory MNC company plans to pursue a project in Italy that will generate revenue of 15 million Euro at the end of the next 3 years. It will have to pay operating expenses of 6 million Euro per year In addition, depreciation is expected to be 1 million Euro per year. The project can be sold for 60 million Euro at the end of its life (net of any capital gain taxes). The Italian government charges 25 percent tax rate on profits. The parent company will finance the project which costs Euro 30 million if it decided to undertake it. The company uses a discount ate of 12% for projects with similar risk. The spot ate of the Euro is currently $1.22 and is expected to depreciate by 5 percent each year for the next three years.

Fill in the following blanks for the required variables to find the NPV Insert your answers in MILLION. For example, for 1.5 million, insert 1.5. Round your answers to 2 decimal places. Year Cash flow in Dollar (S) PV of cash flow NPV Should you accept the project? (YES/NO)

year 0 1 2 3

cash flow in Dollar ($) ?? ?? ?? ??

PV of cash flow ?? ?? ?? ??

NPV    ?? ?? ?? ??

please fill these. I need it for tomorrow

Answer 1

Yr	0	1	2	3
Revenue ( in mm Euro)		15.00	15.00	15.00
Cost ( in mm Euro)		6.00	6.00	6.00
Depreciation (in mm Euro)		1.00	1.00	1.00
EBT		8.00	8.00	8.00
Tax @ 25%		2.00	2.00	2.00
PAT		6.00	6.00	6.00
Add: Depreciation		1.00	1.00	1.00
Add: end of life value (in mm Euro)				60
Less: initial cost (in mm Euro)	30
Total cash flow in Euro million	-30	7	7	67
Exchange rate $/Euro	1.22	1.16	1.10	1.05
Cash flow in $ million	-36.60	8.11	7.71	70.08
PV of cash inflow at 12% ($ million)	$63.27
NPV ($ million)	$26.67
With positive NPV, project should be accepted