8-39. An automobile manufacturing company in Country X is considering the construction and operation of a large plant on the eastern seaboard of the United States. Their MARR = 20% per year on a before-tax basis. (This is a market rate relative to their currency in Country X.) The study period used by the company for this type of investment is 10 years. Additional information is provided as follows:

• The currency in Country X is the Z-Kron.

• It is estimated that the U.S. dollar will become weaker relative to the Z-Kron during the next 10 years.

Specifically, the dollar is estimated to be devalued at an average rate of 2.2% per year.

• The present exchange rate is 92 Z-Krons per U.S. dollar.

• The estimated before-tax net cash flow (in U.S. dollars)

is as follows:

EOY Net Cash Flow (U.S. Dollars)

0 −$168,000,000 1 −32,000,000 2 69,000,000

...

...

10 69,000,000 Based on a before-tax analysis, will this project meet the company’s economic decision criterion? (8.6)