Assignment
Groupe Ariel S.A. - International Project Valuation Assignment
Complete the following questions from the Groupe Ariel S.A. case. Show all your work in an Excel workbook titled YourName_GASA. Build your Excel workbook in accordance with the following criteria:
• Name everything (all data cells, graphs, tables, worksheets should be named).
• Put all the variables that are important (value drivers) at the top of your spreadsheet, never use a number where a formula will also work, avoid the use of blank columns to accommodate cell "spillovers", align everything, and keep related data close.
• Do not use more than two fonts, keep it to 3-5 colors - white, gray, and 1 - 3 accents, Pre-format every page and check for happy printing.
• When done turn off gridlines, column and row headers (A, B, C...1, 2, 3), and chart borders.
1) Assume 3% inflation going forward in France. Based on this assumption and the information contained in the case, what hurdle (discount or cost of capital) rate, in pesos, would you use to discount the cash flows from the project? Show your calculations and assumptions.
2) Compute the project cash flows in pesos for years 0 through 10 and calculate the NPV in pesos. Calculate the IRR of the project. Show your calculations and assumptions in detail. Should the project be accepted or rejected?
3) Convert the Peso NPV to Euros at the June 23, 2008 spot exchange rate. Show your calculations.
Case- Group Ariel S.A.: Parity Condition and Cross-Border Valuation by Timthy A. Luehrman and James Quinn.