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Esposito Enterprises , a U.S. multi-national corporation, plans to open a new retail store in...

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Finance

Esposito Enterprises , a U.S. multi-national corporation, plans to open a new retail store in France. The initial investment is 3 million euros, projected revenues for 3 years are 1.35 euros per year. After 3 years the store will be closed and there is no salvage value. The discount rate (WACC) is 14%. Given the two scenarios below determine whether this capital project should be undertaken given all earnings are converted to U.S. dollars and remitted to the parent corporation.

Year

0

1

2

3

Euros

3 million

1.35 million

1.35 million

1.35 million

Scenario 1($/euro)

$0.98

$0.98

$0.98

$0.98

Scenario 2 ($/euro)

$0.98

$0.95

$0.93

$0.91

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