A company in country X with currency XSD is analyzing a potential investment in country Y with currency YSD. The best estimate is that YSD will be devalued in the international markets at an average of 3%. If the IRR of this project in country Y is 21% what is the IRR of this project in country X?

You are International Business Manager at a UK based company. Your company has identified USA and Europe as potential markets and wish to expand asap and plans a full-scale expansion. 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 (Hint: you can use prevailing interest rates and inflation in each region to base your calculation) and calculate NPV. Allocate discount rate for each project according to current international business climate and justify why you allocated the discount rate for each region. Discuss how you aim to manage international risks. Projected cash flows in respective currencies: Year Net Cash Flow - USA USD Net Cash Flow - Europe EUR 0 - 20 million -20 million 1 2 million 2 million 2 4 million 3 million 3 5 million 4 million 46 million 8 million 58 million 8 million Task: a. Briefly discuss viability of both projects in today's global business context. Based on your…

Vijay

You are considering a geographic expansion into the European market for Canopy Pharmaceuticals. Below are the incremental cash flows for the Canopy project for you to use in your analysis. Assume Canopy's marginal tax rate is 35%, their cost of capital is 15.7 %, and an expected growth rate of 5% after 2003. Calculate the NPV, IRR, Payback Period. Explain how do you determining the initial cost and the terminal value? (Using Gordon Model to find the terminal)