Question: please help, can use excel but make sure formulas are shown if so! if on paper there is a workings column for all work shown!


Privately owned Superior Oil Machine Company is considering investing in Czech Republic to have a refinery source closer to its European customers. The following assumptions are being considered. Other Assumptions: 1. After year 3 , Superior oil expects the refinery to grow by 10% per year in perpetuity. HINT: Compute the terminal value in year 3 for both the project and Superior's investment using the perpetual model. The models are provided in your Lecture slides. 2. Since Superior Oil expects the refinery to operate in perpetuity, there is no expectation to recover the investment in working capital. 3. Variable manufacturing costs are expected to be 50% of sales. 4. The Czech corporate income tax rate is 25% and the United States corporate income tax rate is 30%. 5. The Czech refinery will pay dividends equal to 50% of net income to Superior Oil. Superior Oil will be required to pay taxes in the United States on any dividend income recelved. 6. Superior Oll uses a weighted average cost of capital of 16% for its subsidiary operations and 13% for its parent company operations. Required: A. Compute the Czech refinery's NPV and IRR and determine whether it is an attractive investment using the worksheet provided. Clearly show all your workings. (10 points) B. Compute the NPV and IRR of Superior OII's investment and determine whether it is worthwhile using the worksheet provided. Clearly show all your workings, (10 points) A. Czech refinerv's NPV and IRR B. Superior Oil investment's NPV and IRR
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