Explain all the process to get to the answer:

3) A Firm in the United States is considering an investment in Bangladesh that yields the after tax taka (T) cash flows provided in the time line below. The appropriate discount for similar projects in the United States is 35.2%. The expected inflation in Bangladesh is 15% each year for the foreseeable future. The expected inflation in the United States is 4% each year for the foreseeable future. The appropriate discount rate for similar projects in Bangladesh is 49.5%. Assume the parity conditions hold. The current spot rate is 69.25T/$. What is the net present value of the project from the parent and project perspective? Should they accept the project? Show all the necessary calculations to compute the NPV from BOTH the parent and project perspective.

-2,000,000 T 850,000 T 950,000 T 700,000 T

0 1 2 3

S₀ = 69.25T/$

S1=69.251.151.04=76.57451923 T/$

S2=69.251.1521.042=84.67374723T/$

S3=69.251.1531.043=93.62962434 T/$

Project

CF₀ = -2,000,000

CF₁ = 850,000

CF₂ = 950,000

CF₃ = 700,000

I= 49.5%

NPV = -T796,891.5673/69.25T/$= -$11,507.46

Parent

CF₀ = -2,000,000/69.25 = -28,880.86643

CF₁ = 850,000/76.57451923 = 11,100.29823

CF₂ = 950,000/84.67374723 = 11,219.53417

CF₃ = 700,000/93.62962434 = 7,476.266245

I= 35.2%

NPV = -$11,507.46

You rejected this project because result is negative.