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NPV of the project

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A U.S Corporation as a subsidiary in Netherlands.

It is deciding whether to invest 2 millions from the parent's funds in a 3 year project in the Netherlands.

the after tax cash flows to the subsidiary are estimated to be as follows (in euros):
Year 1 500.000
year 2 800,000
Year 3 900,000
The entire cash flows of the subsidiary are remitted to the parent annually. There is no additional tax or credits in the parent company country.

the exchange rate today is ₤1/$1.20
the exchange rate forecast for the next 3 years is:
Year 1 1/$1.15
Year 2 1/$1.10
Year 3 1/$1.05
Cost of capital for both companies is 13%

1) what is the NPV of this project for both companies
2) should the project be accepted?

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This helps in computation of NPV of the project

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A U.S Corporation as a subsidiary in Netherlands.

It is deciding whether to invest 2 millions from the parent's funds in a 3 year project in the Netherlands.

the after tax cash flows to ...

Purchase this Solution


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