Bambino Ltd , a United Kingdom ( UK ) multinational enterprise, is contemplating making a foreign capital
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Question:
Bambino Ltd a United Kingdom UK multinational enterprise, is contemplating making a foreign capital expenditure in South Africa. The initial cost of the project is ZAR million. The annual cash flows over the fiveyear economic life of the project are estimated to be ZAR million, ZAR million, ZAR million, ZAR million and ZAR million, respectively. The parent firm's cost of capital in pounds is per cent. Longrun inflation is forecasted to be percent per annum in the UK and percent in South Africa. The current spot foreign exchange rate is ZAR Determine the NPV for the project in by a calculating the NPV in ZAR using the ZAR equivalent cost of capital according to the Fisher Effect and then converting to at the current spot rate b converting all cash flows from ZAR to at Purchasing Power Parity forecasted exchang rates and then calculating the NPV at the pound cost of capital c What is the NPV in pound if the actual pattern of ZAR exchange rates are SSSSS and S Justify the difference
Please include all calculation as the previous tutor was not clear
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