1. Chapman, Inc.'s Mexican subsidiary, V. Gomez Corporation, is expected to pay to Chapman 4 pesos in dividends in 1 year after all foreign and U.S. taxes have been subtracted. The exchange rate in 1 year is expected to be $0.06 per peso. After this, the peso is expected to depreciate against the dollar at a rate of 3% a year forever due to the different inflation rates in the United States and Mexico. The peso-denominated dividend is expected to grow at a rate of 8% a year indefinitely. Chapman owns 15 million shares of V. Gomez. What is the present value of the dividend stream, in dollars, assuming V. Gomez's cost of equity is 12%? Do not round intermediate calculations. Round your answer to the nearest dollar. Enter your answer in dollars.

$ _____

2. Foreign Capital Budgeting

The South Korean multinational manufacturing firm, Nam Sung Industries, is debating whether to invest in a 2-year project in the United States. The project's expected dollar cash flows consist of an initial investment of $1 million with cash inflows of $700,000 in Year 1 and $600,000 in Year 2. The risk-adjusted cost of capital for this project is 10%. The current exchange rate is 1,056 won per U.S. dollar. Risk-free interest rates in the United States and S. Korea are:

	1-Year	2-Year
United States	4%	3.75%
S. Korea	3%	2.75%

If this project were instead undertaken by a similar U.S.-based company with the same risk-adjusted cost of capital, what would be the net present value generated by this project? Round your answer to the nearest cent. $ What would be the rate of return generated by this project? Round your answer to two decimal places. %

What is the expected forward exchange rate 1 year from now? Round your answer to two decimal places. won per U.S. $ What is the expected forward exchange rate 2 years from now? Round your answer to two decimal places. won per U.S. $

If Nam Sung undertakes the project, what is the net present value and rate of return of the project for Solitaire? Round your answers to two decimal places.

NPV	won
Rate of return	%