A US carpet manufacturer is planning to invest in a two-year project in Brisbane.

The manufacturer would have to invest 1 million USD in the project now at the start of the first year.

The project is expected to generate 1 million AUD in the first year after the initial investment and 2 million AUD in the second year.

The cost of capital for similar projects is expected to be 13% per year.

What is the NPV of this project if the spot rate for the Australian dollar is forecasted to be USD 0.56 at the end of the first year and USD 0.67 at the end of the second year?

Select the closest answer.

Select one:

a.

USD -17,692

b.

USD 544,992

c.

USD 908,935

d.

USD 44,992

e.

None of the above. We need more information.