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6. A Malaysian company is considering starting a subsidiary in Cambodia. This would require an initial start-up cost of Cambodian (KHR) of KHR 96,000 million.
6. A Malaysian company is considering starting a subsidiary in Cambodia. This would require an initial start-up cost of Cambodian (KHR) of KHR 96,000 million. The after-tax net operating cash flow is expected to be KHR 20,000 million per year for three years. At the end of the third year, the subsidiary would be sold to the local government agency. The KHR- Malaysian Ringgit (MYR) rate is KHR 1,200/MYR at current spot, but it is expected to be KHR 1,212/MYR first year, KHR 1,219/MYR second year and third year KHR1,236/MYR, respectively. The Malaysian company requires an 18 percent return from this investment in Cambodia. Calculate the potential investment's NPV and the salvage value at end of third year. (20 marks)
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