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20. Capital Budgeting Analysis. A project in South Korea requires an initial investment of 2 billion South Korean won. The project is expected to generate
20. Capital Budgeting Analysis. A project in South Korea requires an initial investment of 2 billion South Korean won. The project is expected to generate net cash flows to the subsidiary of 3 billion and 4 billion won in the two years of operation, respectively. The project has no salvage value. The current value of the won is 850 won per Australian dollar, and the value of the won is expected to remain constant over the next two years. a. What is the NPV of this project if the required rate of return is 13 per cent? b. Repeat the question, except assume that the value of the won is expected to be 950 won per Australian dollar after two years. Further assume that the funds are blocked and that the parent company will only be able to remit them back to Australia in two years. How does this affect the NPV of the project
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