INTERNATIONAL CAPITAL BUDGETING - ADJUSTED PRESENT VALUE METHOD

STEP 1 year spot rate

NPV= PV of Cin - PV of Cout 1 0.90087
PRESENT PROPOSED 2 0.90087
sales 10000 units 28000 units 3 0.90087
contribution margin $ 35.00 € 40.00 4 0.90087
growth rate 5% 12% 5 0.90087
inflation rate 3.1% 3.0% 6 0.90087
spot rate 0.90 7 0.90087
cost of project € 4,920,000 $ 6,494,400 8 0.90087
borrowing capacity 2904000
tax rate 35% STEP 2 NPV= PV of Cin - PV of Cout
CASH OUTFLOW 6494400 NPV -3241726.05896832
CASH INFLOW 3252674 STEP 3 calculation of the PV of the depreciation tax shields
Borrowing rate in $ 8% year spot rate
borrowing rate in euro 7% 1 0.90087
2 0.90087
3 0.90087
4 0.90087
5 0.90087
6 0.90087
7 0.90087
8 0.90087
ENT VALUE METHOD
QTY cash flow lost sales units previous Cin net cash inflow
28000 1008979 10500 378892.50 630086.1 409556
31360 1130056 11025 410170.08 719886.0 467926
35123 1265663 11576 444029.62 821633.2 534062
39338 1417542 12155 480684.26 936858.1 608958
44059 1587647 12763 520364.75 1067282.7 693734
49346 1778165 13401 563320.86 1214844.3 789649
55267 1991545 14071 609822.99 1381721.9 898119
61899 2743271 14775 660163.88 2083107.1 1354020
12922868
of Cin - PV of Cout
(The project is not accepted since NPV is negative)
preciation tax shields

615000 179549.2
615000 166249.2
615000 153934.5
615000 142531.9
615000 131974.0
615000 122198.1
615000 113146.4
615000 104765.2
1114348.47
PV
365675
373028
380134
387004
393643
400061
406264
546866
3252674