Please undertake this analysis from BOTH the Parent and Project viewpoints.

4. Branded Co. (Italy). Branded Co. (Italy) is considering investing Venezuelan bolivar VEF 20,000,000 in Ven- ezuela to build a wholly owned haute couture plant to export globally. After five years, the subsidiary, Brand Ven, would be sold to Venezuelan investors for VEF 40,000,000. A pro forma income statement for the Venezuelan operation predicts the generation of VEF 5.375,000 or annual cash flow, and is listed below. Sales revenue 15,000,000 Less cash operating expenses (2000.000) Gross income 8,000,000 Less depreciation expenses (500,000 Earnings before interest and taxes 7500,000 Less Venezuelan taxes at 35% (2.625,000) Net income 4,875,000 Add back depreciation 500,000 Annun cash flow 5,375,000 The initial investment will be made on December 31, 2014, and cash flows will occur on December 31 of each succeeding year. Annual cash dividends to Brand Ven from Venezuela will equal 75% of account- ing income. The Italian corporate tax rate is 20% and the Venezuclan corporate tax rate is 35%. Since the Venezuclan tax rate is greater than the Italian tax rate, annual dividends paid to Branded Co. will not be subject to additional taxes in Italy. There are no capital gains taxes on the final sale. Branded Couses a weighted average cost of capital of 18% on domestic investments, but will add 8 percentage points for the Venezuelan investment because of perceived greater risk. Branded Co. forecasts the Venezuelan bolivar euro exchange rate for December 31 for the next six years as listed helow VEFIE VETE 2014 7 2017 7.5 2015 21 2018 7.6 2016 225 2019 7.75 What is the net present value and internal rate of return on this investment? 4. Branded Co. (Italy). Branded Co. (Italy) is considering investing Venezuelan bolivar VEF 20,000,000 in Ven- ezuela to build a wholly owned haute couture plant to export globally. After five years, the subsidiary, Brand Ven, would be sold to Venezuelan investors for VEF 40,000,000. A pro forma income statement for the Venezuelan operation predicts the generation of VEF 5.375,000 or annual cash flow, and is listed below. Sales revenue 15,000,000 Less cash operating expenses (2000.000) Gross income 8,000,000 Less depreciation expenses (500,000 Earnings before interest and taxes 7500,000 Less Venezuelan taxes at 35% (2.625,000) Net income 4,875,000 Add back depreciation 500,000 Annun cash flow 5,375,000 The initial investment will be made on December 31, 2014, and cash flows will occur on December 31 of each succeeding year. Annual cash dividends to Brand Ven from Venezuela will equal 75% of account- ing income. The Italian corporate tax rate is 20% and the Venezuclan corporate tax rate is 35%. Since the Venezuclan tax rate is greater than the Italian tax rate, annual dividends paid to Branded Co. will not be subject to additional taxes in Italy. There are no capital gains taxes on the final sale. Branded Couses a weighted average cost of capital of 18% on domestic investments, but will add 8 percentage points for the Venezuelan investment because of perceived greater risk. Branded Co. forecasts the Venezuelan bolivar euro exchange rate for December 31 for the next six years as listed helow VEFIE VETE 2014 7 2017 7.5 2015 21 2018 7.6 2016 225 2019 7.75 What is the net present value and internal rate of return on this investment