BROWER LIMITED A US COMPANY JUST CONSTRUCTED A MANUFACTURING PLANT IN GHANA, THE CONSTRUCTION COST A BILLION GHANAIAN CEDI. BROWER INTENDS TO LEAVE THE PLANT OPEN FOR 3 YEAR. DURING THE 3 YEARS OF OPERATIONS CEDU CASH FLOW ARE EXPECTED TO BE 3 BILLION CEDI, 3 BILLION CEDI AND 2BILLION CEDI RESPECTIVELY. OPERATING CASHFLOWS WILL BEGIN ONE YEAR FROM TODAY AND ARE REMITTED BACK TO THE PARENT AT THE END OF EACH YEAR. AT THE END OF THE 3RD YEAR, BROWER EXPECTS TO SELL THE PLANT FOR 5 BILLION CEDI. BROWER HAS A REQUIRED RATE OF RETURN OF 17%. It currently takes 8700 cedi to buy one US DOLLAR AND THE CEDI IS EXPECTED TO DEPRECIATE BY 5% PER YEAR.

Required:

1. Determine the NPV OF THIS PROJECT, SHOULD BROWER BUILD THE PLANT?
2. HOW WOULD YOUR ANSWER CHANGE IF THE VALUE OF CEDI WAS EXPECTED TO REMAIN UNCHANGED FORM ITS CURRENT VALUE OF 8700 CEDI PER US DOLLAR OVER THE COURSE OF THE 3 YEARS? SHOULD BROWER CONSTRUCT THE PLANT THEN?