5. Union Chemical Corp., a U.S.-based petrochemical company, plans to build a new plant in Thailand. The forecast cash flows (in million baht) are as follow.

Year	2007	2008	2009	2010
Cash Flow	-64	20	25	30

The spot exchange rate is $1 = 35 baht. The interest rate in Thailand is 3 percent and the U.S. interest is 5 percent.

a). Calculate the net present value of cash flow from the project in baht and in U.S. dollar.

b). What are the U.S. dollar cash flows from the project if the company hedges against the

exchange rate changes.

c). Suppose that inflation in Thailand accelerates, the domestic interest rate rises to 4 percent (CORRECTED). The U.S. interest rate remains stable at 5 percent (CORRECTED). Please calculate the new cash flows in U.S.

dollar if the company hedges against the exchange rate fluctuation