Assume that Venezuela charges a duty of 15% on goods imported into Venezuela from the US. The Pearl Brewery Co. in the previous question discovers that it can brew beer in Valencia near Caracas in Venezuela and bypass this 15% value added tax.

List all the factors that the Pearl Brewery Co. should consider when deciding to continue to export beer from San Antonio versus brewing beer in Valencia. Despite this added 15% surcharge, suppose that the Valencia facility could produce the following free cash flows in millions of VEFs:

Year: 0 1 2 3 4 5

Cash Flows: -8.5 1.5 3.5 3.0 2.0 5.5

The nominal interest rate in the US is 4% (30-year T-Bond) while the rate in Venezuela is 10% (30-year Sovereign). The current Spot Rate is: VEF 6.29287/$ as of 6/28/2013. The 180-day Forward Rate is: $ 0.15700/ 1 VEF. Venezuelan lending rates are 6%. The 180 day strike price for the Put Option to sell the VEF is: $0.15695/VEF with a 0.4 cent premium per VEF. Does this make sense to produce this fine beer in Valencia? Justify your response!