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

ZAR$12,600.$ The annual cash flows over the five$-$year economic life of the project in ZAR are estimated to be $3,780,4,780,5,770,6,760,$

and $7,650.$ 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 $A$

Required B

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