Briefly describe special problems that occur in multinational capital budgeting, and describe the process for evaluating a foreign project. Now consider the following project: A U.S. company has the opportunity to lease a manufacturing facility in Japan for 2 years. The company must spend ¥l billion initially to refurbish the plant. The expected net cash flows from the plant for the next 2 years, in millions, are CF1 ¥500 and CF2 = ¥800. A similar project in the United States would have a risk-adjusted cost of capital of 10%. In the United States, a 1 year government bond pays 2% interest and a 2-year bond pays 2.8%. In Japan, a 1-year bond pays 0.05% and a 2-year bond pays 0.26%. What is the project’s NPV? Citrus Products Inc. is a medium-sized producer of citrus juice drinks with groves in Indian River County, Florida. Until now, the company has confined its operations and sales to the United States, but its CEO, George Gaynor, wants to expand into Europe. The first step would be to set up sales subsidiaries in Spain and Sweden, then to set up a production plant in Spain, and, finally, to distribute the product throughout the European common market. The firm’s financial manager, Ruth Schmidt, is enthusiastic about the plan, but she is worried about the implications of the foreign expansion on the firm’s financial management process. She has asked you, the firm’s most recently hired financial analyst, to develop a 1 -hour tutorial package that explains the basics of multinational financial management. The tutorial will be presented at the next board of directors’ meeting. To get you started, Schmidt has supplied you with the following list of questions: