Manzetti Foods, a U.S. food processing and distribution company, is considering an investment in Germany. You are in Manzetti's corporate finance department and are responsible for deciding whether to undertake the project. The expected free cash flows, in euros, are uncorrelated to the spot exchange rate and are shown here: Year Free Cash Flow (€ million) 0 - 16.3 1 7 2 9 3 11 4 12 The new project has similar dollar risk to Manzetti's other projects. The company knows that its overall dollar WACC is 11.38%, so it feels comfortable using this WACC for the project. The risk-free interest rate on dollars is 5.21% and the risk-free interest rate on euros is 4.63%. a. Manzetti Foods is willing to assume that capital markets in the United States and the European Union are internationally integrated. What is the company's euro WACC? b. What is the present value of the project in euros? a. Manzetti Foods is willing to assume that capital markets in the United States and the European Union are internationally integrated. What is the company's euro WACC? The company's euro WACC is %. (Round to three decimal places.)
Manzetti Foods, a U.S. food processing and distribution company, is considering an investment in Germany. You are in Manzetti's corporate finance department and are responsible for deciding whether to undertake the project. The expected free cash flows, in euros, are uncorrelated to the spot exchange rate and are shown here: Year Free Cash Flow (€ million) 0 - 16.3 1 7 2 9 3 11 4 12 The new project has similar dollar risk to Manzetti's other projects. The company knows that its overall dollar WACC is 11.38%, so it feels comfortable using this WACC for the project. The risk-free interest rate on dollars is 5.21% and the risk-free interest rate on euros is 4.63%. a. Manzetti Foods is willing to assume that capital markets in the United States and the European Union are internationally integrated. What is the company's euro WACC? b. What is the present value of the project in euros? a. Manzetti Foods is willing to assume that capital markets in the United States and the European Union are internationally integrated. What is the company's euro WACC? The company's euro WACC is %. (Round to three decimal places.)
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Transcribed Image Text:Manzetti Foods, a U.S. food processing and distribution company, is considering an investment in Germany. You are in Manzetti's corporate finance department and are responsible for deciding whether to
undertake the project. The expected free cash flows, in euros, are uncorrelated to the spot exchange rate and are shown here:
Year
Free Cash Flow (€ million)
0
- 16.3
1
7
2
9
3
11
4
12
The new project has similar dollar risk to Manzetti's other projects. The company knows that its overall dollar WACC is 11.38%, so it feels comfortable using this WACC for the project. The risk-free interest rate on
dollars is 5.21% and the risk-free interest rate on euros is 4.63%.
a. Manzetti Foods is willing to assume that capital markets in the United States and the European Union are internationally integrated. What is the company's euro WACC?
b. What is the present value the project in euros?
C
a. Manzetti Foods is willing to assume that capital markets in the United States and the European Union are internationally integrated. What is the company's euro WACC?
The company's euro WACC is %. (Round to three decimal places.)
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