1.IBM wants to undertake a 5yrs project in the USA that has the projected free cash flow stream shown below. What is the net present value (NPV) of the project if the WACC is 10%? Assume the initial investment is $6,500
Years : 2019 2020 2021 2022 2023
Free Cash Flows : $1,000 $2,000 $3,000 $4,000 $5,000
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Find the NPV and IRR
2.Assume the project will be undertaken by IBM’s subsidiary in Canada with the same forecasted free cash flow stream. What is the NPV of the project given the projected exchange rates of C$/US$?
Assume the initial investment is C$6,500 and the existing exchange rate is $.5/C$
Years : 2019 2020 2021 2022 2023
Free Cash Flows : C$1,000 C$2,000 C$3,000 C$4,000 C$5,000
Exchange rates : .50 .50 .50 .50 .50
Find the NPV and IRR
4.What is the valuation formula of a domestic US firm?
5.What is the valuation formula for the MNC?
6.How are the formulas similar? How are they different?
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