1. Baps Corporation is considering a $10 million investment in the establishment of a subsidiary in Scotland. Baps expects to sell their subsidiary for 2 million after five years. Their required rate of return is 10%. Listed below are the estimated cash flows over the projects lifetime:

	Year 1	Year 2	Year 3	Year 4	Year 5
Estimated Cash-Flows	(2 million)	4 million	5 million	6 million	5+2 mill
Direct Quotation of	$1.00	$1.10	$1.20	$1.25	$1.20
Required Rate of Return	10%	10%	10%	10%	10%

1. What is the net present value of the Scotland project? Whats the investment decision? (5+3)
2. What if you must raise the required rate of return 15% due to increased country risk? (Compute the revised NPV). Does your decision change now? (5+2)