Consider the investment in China from Problem 13.1. a. Suppose that a manager expects the following future
Question:
Consider the investment in China from Problem 13.1.
a. Suppose that a manager expects the following future exchange rates:
Using a yuan discount rate of 11.745 percent and the shekel discount rate of 15 percent, calculate NPV from the parent and project perspectives. Should the manager invest in the project? Should the manager hedge the project's currency risk exposure?
b. Repeat part
(a) using the following expected spot rates of exchange:
Should the manager invest? Should the manager hedge the project's currency risk exposure?
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