a) Virtual tech Bhd is a Malaysian firm and planning to construct a manufacturing plant in Thailand. The construction cost would be 15 million Thai baht (THB). Virtual tech Bhd intends to leave the plant open for three years. During the three years of operation, the cash flows that will be generated from the plant are expected to be 4 million Thai baht and 5 million Thai baht for the first and second year, respectively. In Year 3, the expected cash flow is 3 million Thai baht. At the end of the third year, Virtual tech Bhd expects to sell the plant for 4 million Thai baht. The company has a required rate of return of 8 percent. Assume that currently it takes 7.5 Thai baht to buy one Malaysian Ringgit, and the Thai baht is expected to depreciate by 5 percent per year. i) Determine whether Virtual tech Bhd should accept or reject the project. Support your answer by calculating the Net Present Value (NPV). (10 marks) ii) Assume that the value of the Thai baht is expected to remain unchanged from its current value of 7.5 Thai baht per Malaysian Ringgit over the course of the three years. Calculate the value which affect the NPV of the project and Virtual tech Bhd's decision. (5 marks) iii) Assume that the funds that would be generated from the project would be blocked and Virtual tech Bhd will only be able to remit them back to Malaysia in the last year (year three). Assume that the value of the Thai baht is expected to remain unchanged from its current value of 7.5 Thai baht per Malaysian Ringgit over the course of the three years. Compute the new NPV value of the project and explain the effect on Virtual tech Bhd's decision. (5 marks) b) As a finance manager, you are responsible to source for short-term financing to be used in 3 month's time to pay your supplier. The financing needed is US$250,000. Your banker informed that the interest rates in Malaysia and the United States are 9% and 8% per annum respectively. The current spot exchange rate is RM3.6338/US$ and the 3-month forward is RM3.6399/US$. Determine how could you take advantage of interest rates differential and the availability of the forward market to secure your funds. (5 marks) a) Virtual tech Bhd is a Malaysian firm and planning to construct a manufacturing plant in Thailand. The construction cost would be 15 million Thai baht (THB). Virtual tech Bhd intends to leave the plant open for three years. During the three years of operation, the cash flows that will be generated from the plant are expected to be 4 million Thai baht and 5 million Thai baht for the first and second year, respectively. In Year 3, the expected cash flow is 3 million Thai baht. At the end of the third year, Virtual tech Bhd expects to sell the plant for 4 million Thai baht. The company has a required rate of return of 8 percent. Assume that currently it takes 7.5 Thai baht to buy one Malaysian Ringgit, and the Thai baht is expected to depreciate by 5 percent per year. i) Determine whether Virtual tech Bhd should accept or reject the project. Support your answer by calculating the Net Present Value (NPV). (10 marks) ii) Assume that the value of the Thai baht is expected to remain unchanged from its current value of 7.5 Thai baht per Malaysian Ringgit over the course of the three years. Calculate the value which affect the NPV of the project and Virtual tech Bhd's decision. (5 marks) iii) Assume that the funds that would be generated from the project would be blocked and Virtual tech Bhd will only be able to remit them back to Malaysia in the last year (year three). Assume that the value of the Thai baht is expected to remain unchanged from its current value of 7.5 Thai baht per Malaysian Ringgit over the course of the three years. Compute the new NPV value of the project and explain the effect on Virtual tech Bhd's decision. (5 marks) b) As a finance manager, you are responsible to source for short-term financing to be used in 3 month's time to pay your supplier. The financing needed is US$250,000. Your banker informed that the interest rates in Malaysia and the United States are 9% and 8% per annum respectively. The current spot exchange rate is RM3.6338/US$ and the 3-month forward is RM3.6399/US$. Determine how could you take advantage of interest rates differential and the availability of the forward market to secure your funds
