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a A company is considering investing in a project in Brazil. If the economy improves the present value (NPV at time=1) of future discounted expected
a A company is considering investing in a project in Brazil. If the economy improves the present value (NPV at time=1) of future discounted expected cash flows will be BRL 20,000, and the exchange rate will be BRL 2.00/USD. The objective probability that the economy will improve is 70%. If there is a recession, the NPV will be BRL 8,000 (NPV at time=1) and the exchange rate will be BRL 2.5/USD. The appropriate risk-adjusted rate of return (cost of capital) is 8% in USD. The initial capital investment required at time is USD 8,000. The company always has the option to abandon the project and recover the BRL 12,500 salvage value (after-tax). Compute the expected NPV of the project. If your answer is NEGATIVE don't forget to enter the minus sign. a A company is considering investing in a project in Brazil. If the economy improves the present value (NPV at time=1) of future discounted expected cash flows will be BRL 20,000, and the exchange rate will be BRL 2.00/USD. The objective probability that the economy will improve is 70%. If there is a recession, the NPV will be BRL 8,000 (NPV at time=1) and the exchange rate will be BRL 2.5/USD. The appropriate risk-adjusted rate of return (cost of capital) is 8% in USD. The initial capital investment required at time is USD 8,000. The company always has the option to abandon the project and recover the BRL 12,500 salvage value (after-tax). Compute the expected NPV of the project. If your answer is NEGATIVE don't forget to enter the minus sign
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