Delta Equity, a U.S.based private equity firm, is trying to determine what it should pay for a tool manufacturing firm in Honduras named Kelloggs. Delta Equity estimates that Kelloggs will generate a free cash flow of 130,000 Honduran lempiras (Lp) next year (2017), and that this free cash flow will continue to grow at a constant rate of 8.0% per annum indefinitely. A private equity firm like Delta Equity, however, is not interested in owning a company for long, and plans to sell Kelloggs at the end of three years for approximately 10 times Kelloggss free cash flow in that year. The current spot exchange rate is Lp14.50/$, but the Honduran inflation rate is expected to remain at a relatively high rate of 16.0% per annum compared to the U.S. dollar inflation rate of only 2.0% per annum. Delta Equity expects to earn at least a 20% annual rate of return on international investments like Kelloggs. a. What is Kelloggs worth if the Honduran lempira were to remain fixed over the three year investment period? b. What is Kelloggs worth if the Honduran lempira were to change in value over time according to purchasing power parity?