Benning Co. is considering an investment in South Africa. The initial investment is 1,500,000 South African Rand (ZAR), which will happen in 2020 if Benning accepts the project. Assume that the appropriate cost of capital (discount rate) for the project is 15% (in terms of USD) and their tax rate is 25%. Benning expects that their cash flows from their South African investment will grow at the same rate as South African inflation (in ZAR). You expect to receive these cash flows indefinitely into the future.

Benning has estimated the following cash flows for 2021 in South African Rand:

Revenues 450,000

Operating Costs 270,000

Depreciation 80,000

Expected average annual inflation rates:

United States: 2.4%

South Africa: 9.8%

Market Information:

Current exchange rate (2020): $0.2588 = ZAR 1

Should Benning accept this project? (4 points)