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

is ZAR$13,000.$ The annual cash flows over the five$-$year economic life of the project in ZAR are estimated to be $3,980,4,900,$

$5,890,6,880,$ and $7,750.$ 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 $=3\mathrm{.}75.$ 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$.$ Are the two USD NPVs different or the same?

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

$S(4)=6\mathrm{.}9,$ and $S(5)=6\mathrm{.}9?$