$(4$ pts$)$ Describe in general terms how future appreciation of the euro will likely affect the value $($from the parent's perspective$)$ of a project established in Germany today by a U$.$S$.$based MNC$.$ Will the sensitivity of the project value be affected by the percentage of earnings remitted to the parent each year?

$(4$ pts$)$ Huskie Industries, a U$.$S$.-$based MNC$,$ considers purchasing a small manufacturing company in France that sells products only within France. Huskie has no other existing business in France and no cash flows in euros. Would the proposed acquisition likely be more feasible if the euro is expected to appreciate or depreciate over the long run? Explain.

$(4$ pts$)$ Flagstaff Corp. is a U$.$S$.-$based firm with a subsidiary in Mexico. It plans to reinvest its earnings in Mexican government securities for the next $10$ years since the interest rate earned on these securities is so high. Then, after $10$ years, it will remit all accumulated earnings to the United States. What is a drawback of using this approach? $($Assume the securities have no default or interest rate risk.$)$

$(10$ pts$)$ Brower, Inc. just constructed a manufacturing plant in Europe. The construction cost $14$ million Euros. Brower intends to leave the plant open for three years. During the three years of operation, Euro cash flows are expected to be $2$ million euros, $2$ million euros, and $3$ million euros, respectively. Year $1$ cash flow $=2$ mil Euros, Year $2$ cash flow $=2$ million Euros and are remitted back to the parent at the end of each year. At the end of the third year, Brower expects to sell the plant for $10$ million euros. Bower will receive an additional $10$ million Euros at the end of year $3.$ Brower has a required rate of return of $10$ percent. The current exchange rate is $$1\mathrm{.}08/$euro and the Euro is expected to depreciate to $$\frac{1\mathrm{.}07}{?}$ euro by the end of year $1,$$$\frac{1\mathrm{.}06}{?}$ euro by the end of year $2$ and $$\frac{1\mathrm{.}05}{?}$ euro by the end of year $3.$

a$)$ Determine the NPV for this project. Should Brower build the plant?

b$)$ How would your answer change if the value of the euro was expected to appreciate from its current value of $$\frac{1\mathrm{.}08}{?}$ euro to $$1\mathrm{.}10/$euro in year $1,$$$\frac{1\mathrm{.}15}{?}$ euro in year $2$ and $$\frac{1\mathrm{.}20}{?}$ euro in year $3?$ What is the NPV under the strengthening scenario?