- 4 A Company Reviews Two Mutually Exclusive Sales Expansion Strategies For The Upcoming Years Either They Expand Their 1 (96.68 KiB) Viewed 28 times
4 A company reviews two (mutually exclusive) sales expansion strategies for the upcoming years: Either they expand their sales domestically, or internationally (and the company does not have the resources to do both) Either strategy would require an upfront investment of €89.0 mln of promotions, advertising, etc, yet for the domestic activities the company applies a WACC of 6.0%, whereas abroad they always use a WACC of 12.0%. The below table summarises the expected NOCFs for either expansion strategy (all NOCFS in € mln) NOCF(1) NOCF(2) NOCF(3) NOCF(4) Domestic strategy 29.0 34.0 320 26.0 International strategy 25.0 33.0 38.0 30.0 Assume that after 4 years, the initial investment in marketing and sales has vanished and expires worthlessly 0.75p a What is the NPV of the "domestic strategy"? Give in your final answer in millions, rounded to two decimal places. Ignore the currency sign, and use a decimal point Example. You calculate an NPV of €12345678 mln, and now give in: 1235 Answer 0.75p b What is the NPV of the "international strategy"? Give in your final answer in millions, rounded to two decimal places. Ignore the currency sign, and use a decimal point Example You calculate an NPV of €12.345678 mln, and now give in: 12:35 Would your NPV be negative, then use a minus sign. For example, you calculate an NPV of -C12.3456 min and give in: -12.35 Answer 0 5p c Σ. Based on the NPV criterion, which strategy should the company now pursue? Domestic strategy International strategy