Question: ( A ) [ 2 0 points ] Your firm is based in southern Ireland ( and thereby operates in euro, not pounds ) and
A points Your firm is based in southern Ireland and thereby operates in euro, not pounds and is considering an investment in the United States. The project involves selling widgets: you project a sales volume of widgets per year, sales price of $ per widget with a contribution margin of $ per widget. The project will last for years, require an investment of $ at time zero which will be depreciated straightline to $ over the years Salvage value for the equipment is projected to be $ The project will operate in rented quarters: $ rent is due at the start of each year. The corporate tax rate is percent in Ireland and percent in the US For simplicity, assume that taxes are paid like sales taxes: immediately. The spot exchange rate is $ The cost of capital to the Irish firm for a domestic project of this risk is percent. The US riskfree rate is percent; the Irish riskfree rate is percent. Find the breakeven price in dollars and breakeven quantity for the US project.
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