Brick Ltd$,$ a UK multinational company, is assessing the possibility to make a foreign capital

expenditure in Thailand. The initial cost of the project in Thai Baht $($i$.$e$.,$ THB$,$ currency of

Thailand$)$ is THB $9,000,000.$ The annual cash flows over the five$-$year economic life of the

project in THB are estimated to be $40,000,50,000,70,000,90,000$ and $110,000,$ respectively.

The parent firm's cost of capital in GBP is $7\%.$ Long$-$run inflation is forecasted to be $2\%$ per

annum in the U$.$S$.$ and $5\%$ per annum in Thailand. The current spot foreign exchange rate is THB

$40\mathrm{.}15$ per GBP$.$

I. Calculate the THB equivalent cost of capital? $[3$ marks$]$

II$.$ Using Relative purchasing power parity $($RPPP$)$ theory, calculate the forecasted GBP$/$THB

exchange rates for the year $1,2,3,4,$ and $5.[5$ marks$]$

III. Calculate the NPV of the project in GBP$.[5$ marks$]$

IV$.$ Explain, should this project be rejected$/$accepted$?[2$ marks$]$

Note: Round your numbers to two decimal places.