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