Question: Assume that in the original Ityesi example in Table all sales actually occur in the United States and are projected to be $59.8 million per

Assume that in the original Ityesi example in Table all sales actually occur in the United States and are projected to be $59.8

Assume that in the original Ityesi example in Table all sales actually occur in the United States and are projected to be $59.8 million per year for four years. The risk-free rate on dollars is 4% and the risk-free rate on pounds is 7%. Ityesi's WACC is 7.44%. The spot exchange rate is $1.37 per pound. The tax rate is 25% in both countries. Keeping other costs the same, calculate the NPV of the investment opportunity. 0 1 2 3 4 Year Forward Exchange Rate ($/) 1.4019 1.3995 1.3357 1.1778 1.1227 Calcualte the cash flows below: (Round to three decimal places. Forward exchange rates must be rounded to four decimal places.) Year 0 Free cash flow (millons of pounds) Forward exchange rate Free cash flow (millons of dollars) Sales in the US (millons of dollars) Cash flow (millons of dollars) X The ....... ssur sk-frl punt Data table bot Y F TABLE 23.2 0 1 2 3 alcu Expected Foreign Free Cash Flows from Ityesi's U.K. Project -3.333 1 Year 2 Incremental Earnings Forecast ( million) 3 Sales 4 Cost of Goods Sold 5 Gross Profit 6 Operating Expenses 7 Depreciation 8 EBIT 9 Income Tax at 25% 10 Unlevered Net Income 11 Free Cash Flow 12 Plus: Depreciation 13 Less: Capital Expenditures 14 Less: Increases in NWC 15 Pound Free Cash Flow 37.500 37.500 - 15.625 - 15.625 21.875 21.875 -8.125 -8.125 -3.750 -3.750 10.000 10.000 -2.500 -2.500 7.500 7.500 37.50 15.6: 21.81 -8.12 -3.74 10.00 -2.51 7.50 -3.333 0.833 -2.500 3.750 3.750 3.7 -15.000 -17.500 11.250 11.250 11.2: Print Done

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