ABC Corporation is seeking to expand its business to China. Kevin Johnson, the CFO of ABC Corporation, was hired to make a decision for the corporation whether to invest in the project.

The expected cash flow of the project is estimated below:

Period	0	1	2	3	4	5
Cash Flow (CN)	-5,000,000	2,000,000	1,500,000	1,000,000	1,250,000	1,500,000

Assume that WACC is 13% for the project.

1. Calculate the net present value of the investment in CN.

2. If the exchange rate is expected to be constant at CN7/$, what is the net present value in U.S. Dollar?

3. Assume that the exchange rate is expected to change overtime as follow:

-Year 0: 7.00CN/$

-Year 1: 7.20CN/$

-Year 2: 7.45CN/$

-Year 3: 7.90CN/S

-Year 4: 6.80CN/$

-Year 5: 7.4CN/$

Calculate the net present value of the investment and explain whether he should take the investment.

4. Kevin is aware that operating the business oversea can increase the agency problem. What are the factors related to agency problem that Kevin should be considered to ensure that he can maximize the shareholder's wealth?