What is the npv of the project to the parent

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Financing Subsidy. Needles Corporation, a Dutch MNC, is considering a project in the United States. The initial investment is EUR 25,000. The firm raises 75 percent of this funding in the United States through its subsidiary. This funding is through a term loan at a cost of 6 percent. Needles uses a cost of capital of 12 percent to discount the cash flows of its projects in the United States. This is a four- year project with annual revenues of USD 24,000. Direct expenses are 25 percent, and fixed expenses excluding depreciation are USD 3,000 annually. The spot rate EURUSD equals 1.10. U. S. taxes are 32 percent.

You have additional information that the local financing was obtained at a cost of 6 percent because of certain governmental guarantee programs; otherwise, the interest cost would have been 8.5 percent. What is the NPV of the project to the parent?

Reference no: EM132061248

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