Question
Americo Corp is considering the construction of a manufacturing plant in Brazil. The initial investment will cost 14 million Brazilian reals (R). The company plans
Americo Corp is considering the construction of a manufacturing plant in Brazil. The initial investment will cost 14 million Brazilian reals (R). The company plans to keep the plant open for 3 years during which cash flows from operations will be 5 million, 5 million, and 4 million reals respectively at the end of each of the three years. At end of the third year, Americo plans to sell the plant for 10 million reals. Americos required rate of return is 15% and the current exchange rate R/$ is 3.87. If the real is expected to depreciate by 5% per year determine the NPV for this project. Should Americo build this plant? (Ans = $370,910.29)
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