Your firm is based in southern Ireland (and thereby operates in euro,not pounds)and is considering an investment in the United States.
The project involves selling widgets: you project a sales volume of 50,000 widgets per year,sales price of $20 per widget with a contribution margin of $15 per widget.
The project will last for 5 years,require an investment of $1,000,000 at time zero (which will be depreciated straight-line to $10,000 over the 5 years).Salvage value for the equipment is projected to be $10,000.The project will operate in rented quarters: $300,000 rent is due at the start of each year.
The corporate tax rate is 12½ percent in Ireland and 40 percent in the U.S.
For simplicity,assume that taxes are paid like sales taxes: immediately.
The spot exchange rate is $1.50 = €1.00.The cost of capital to the Irish firm for a domestic project of this risk is 8 percent.The U.S.risk-free rate is 3 percent; the Irish risk-free rate is 2 percent.
Repeat the above project analysis assuming that the Irish firm could replicate the project in Ireland.(i.e.cash flow out the project in Ireland and find break-even price (in €),quantity,NPV,IRR (in euro not dollars).

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The Answer of Your firm is based in southern Ireland (and thereby operates in euro,not pounds)and is considering an investment in the United States.
The project involves selling widgets: you project a sales volume of 50,000 widgets per year,sales price of $20 per widget with a contribution margin of $15 per widget.
The project will last for 5 years,require an investment of $1,000,000 at time zero (which will be depreciated straight-line to $10,000 over the 5 years).Salvage value for the equipment is projected to be $10,000.The project will operate in rented quarters: $300,000 rent is due at the start of each year.
The corporate tax rate is 12½ percent in Ireland and 40 percent in the U.S.
For simplicity,assume that taxes are paid like sales taxes: immediately.
The spot exchange rate is $1.50 = €1.00.The cost of capital to the Irish firm for a domestic project of this risk is 8 percent.The U.S.risk-free rate is 3 percent; the Irish risk-free rate is 2 percent.
Repeat the above project analysis assuming that the Irish firm could replicate the project in Ireland.(i.e.cash flow out the project in Ireland and find break-even price (in €),quantity,NPV,IRR (in euro not dollars).

Your Firm Is Based in Southern Ireland (And Thereby Operates