Flagstaff Corp. is a U$.$S$.-$based MNC is considering establishing a three$-$year project in Canada with a US$$38$ million initial investment.

The firm!s cost of capital is $13\%.$

The required rate of return on this project is $15\%.$

The project is expected to generate cash flows of C$$15$ million in Year $1,$ C$$20$m in year $2$ and C$$25$ million in Year $3,$ and is expected to have a salvage value of C$$30,000,000.$

Assume a $10\%$ tax on remitted funds, and a stable exchange rate of $$1\mathrm{.}33,$ $$1\mathrm{.}30$ and $$1\mathrm{.}25$ per C$ in years $1,2$ and $3$

respectively.

All cash flows are remitted to the parent.

a$.$ What is the amount of US dollars that will be remitted to the parent company year? Hint:

use after tax cash flows.

b$.$ Which rate should be used to discount the cash flows?

c$.$ Calculate the present values of the remitted cash flows.

d$.$ What is the NPV of the project?

e$.$ Should the project be accepted?