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4. (a) A foreign investment project with an initial cost of $20,000 is expected to produce net cash flows in Australian Dollars of AUD7,500 for
4. (a) A foreign investment project with an initial cost of $20,000 is expected to produce net cash flows in Australian Dollars of AUD7,500 for each of the next four years. The current exchange rate is $1.20/AUD and it has been maintained until at the end of the period. (0) Forecast the Net Present Value (NPV) of the project if the required rate of return is 20 percent in Australian dollar currency. (10 marks) (ii) ( With the same required rate of return in 2(a), compute the salvage value for the three years' project
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