For planning purposes, Year 5 is the cut-off year, when the realisable value of the plant and equipment is estimated at L24 million. The working capital will be realised, subject to losses of L2 million on stocks and L2 million on debtors. Funds realised will be used to repay the local borrowing, and the balance transferred to the United Kingdom without further tax penalty or restriction.

The exchange rate is forecast to remain at L4 vs. £1 until Year 2, when the latt is expected to fall to L5 vs. £1.

Required

(i) Is the project acceptable from the Lastonian Ministry’s point of view?

(ii) Is it worthwhile from the viewpoint of the foreign subsidiary?

(iii) Does it create wealth for Brighteyes’ shareholders?