Delta Company, a U$.$S$.$ MNC$,$ is contemplating making a foreign capital expenditure in South Africa. The initial cost of the project is

ZAR$10,600.$ The annual cash flows over the five$-$year economic life of the project in ZAR are estimated to be $3,200,4,180,5,170,$

$6,160,$ and $7,150.$ The parent firm's cost of capital in dollars is $9\mathrm{.}5$ percent. Long$-$run inflation is forecasted to be $3$ percent per

annum in the United States and $7$ percent in South Africa. The current spot foreign exchange rate is ZAR per USD $=3\mathrm{.}75.$

Required:

Complete this question by entering your answers in the tabs below.

Required A

Calculating the NPV in ZAR using the ZAR equivalent cost of capital according to the Fisher effect and then converting to USD

at the current spot rate.

Note: Do not round the intermediate calculations. Round the final answer to the nearest whole number.

NPV in USD using fisher effect

a$.$ Calculating the NPV in ZAR using the ZAR equivalent cost of capital according to the Fisher effect and then converting to USD

at the current spot rate.

b$.$ Converting all cash flows from ZAR to USD at purchasing power parity forecasted exchange rates and then calculating the NPV

at the dollar cost of capital.

c$.$ What is the NPV in dollars if the actual pattern of ZAR per USD exchange rates is: $S(0)=3\mathrm{.}75,S(1)=5\mathrm{.}7,S(2)=6\mathrm{.}7,S(3)=7\mathrm{.}2,S(4)=$

$7\mathrm{.}2,$ and $S(5)=8\mathrm{.}2?$