Delta Company, a U.S. MNC, is contemplating making a foreign capital expenditure in South Africa. The initial cost of the project is ZAR12,000. The annual cash flows over the five year economic life of the project in ZAR are estimated to be 3,500; 4,500; 5,500; 6,500; and 7,500. The parent firms cost of capital in dollars is 8.5%. Long-run inflation is forecasted to be 3.5% per annum in the U.S. and 7.25% percent in South Africa. The current spot foreign exchange rate is ZAR/USD = 3.75.

a. Determine the NPV for the project in USD.

b. . Determine the NPV for the project in ZAR.

c. What is the NPV in dollars if the actual pattern of ZAR/USD exchange rates is: S(0) = 3.75, S(1) = 5.7, S(2) = 6.7, S(3) = 7.2, S(4) = 7.7, and S(5) = 8.2?