Belle inc. is considering the development of a subsidiary in Singapore that could manufacture and

sell Cricket Bat locally. An estimated 25 million Singapore dollars (S$), which includes funds to support

working capital, would be needed for tile project. Given, the existing spot rate of $.55 per Singapore

dollar, the U.S.-dollar amount of the parent's initial investment is $13.75 million. The project is

expected to end in five years. The estimated price, demand schedules and other information during

each of the next five years are shown here:

Year Price per

Racket

Demand in

Singapore

Variable Costs (VC) per

Racket

Exchange

Rate

PV of $1 at

15%

1 S$400 75,000 units S$ 210 $0.60 0.870

2 S$405 75,000 units S$ 220 $0.65 0.756

3 S$410 100,000 units S$ 260 $0.67 0.658

4 S$420 125,000 units S$ 280 $0.69 0.572

5 S$450 150,000 units S$ 300 $0.70 0.497

The expense of leasing extra office space is S$ 1.2 million per year. Other annual overhead expenses

are expected to be S$ 1.15 million per year. The Singapore government will impose a 20-percent tax

rate on income. In addition, it will impose a 15percent withholding tax on any funds remitted by the

subsidiary to the parent. The amount of depreciation is S$ 2.75 million per year. The Singapore

government will send a payment of S$15million to the parent to assume ownership of the

subsidiary at the end of five years. GS Inc. requires a 15 percent return on this project.

Required: Calculate NPV to evaluate the project.