Question: Assume that in the original Ityesi example in Table , all sales actually occur in the United States and are projected to be $63.1 million

Assume that in the original Ityesi example in Table

Assume that in the original Ityesi example in Table , all sales,

all sales actually occur in the United States and are projected to be $63.1 million per year for four years. Keeping other costs the same, calculate the NPV of the investment opportunity. Assume the WACC is 6.7%. The forward exchange rates are given below.

Year

0

1

2

3

4

Forward Exchange Rate

($/)

1.6735

1.6148

1.5119

1.6081

1.4927

Calculate the cash flows below:(Round to three decimal places. Forward exchange rates must be rounded to four decimal places.)

YEAR

0

1

2

3

4

Free Cash Flow (millions of pounds)

Forward Exchange Rate

Free Cash Flow (millions of dollars)

Sales in the US (millions of dollars)

Cash Flow (millions of dollars

1 Data Table TABLE 31.1 SPREADSHEET Expected Foreign Free Cash Flows from Ityesi's U.K. Project Year 2 3 Incremental Earnings Forecast (E millions) 1 Sales 2 Cost of Goods Sold 3 Gross Profit 4 Operating Expenses 5 Depreciation 6 EBIT 7 Income tax at 40% 8 Unlevered Net Income Free Cash Flow 9 Plus: Depreciation 10 Less: Capital Expenditures 11 Less: Increases in NWC 37500 37500 37500 37500 (15.625) 15.625) 15.625) 15.625) 21.875 21.875 21.875 21.875 (4.167) (5.625) (5.625) (5.625) (5.625) - (3.750) (3.750) (3.750) (3.750) (4.167) 12.500 12.500 2.500 12.500 1.667 5.000 5.000 (5.000 (5.000) (2.500) 7500 7500 7500 7500 3.750 3.750 3.750 3.750 (15.000) 12 Pound Free Cash Flow (17.500) 11.250 11.250 11.250 11.250

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