Following information related foreign project (setting up as project in New Zealand) has been given to you. The initial investment required is 40 million in New Zealand dollars (NZS). Given the existing spot rate of 50.5 per New Zealand dollar, the initial investment in U.S. dollars is $ 20 million. In addition to the NZS 40 million initial investment for plant and equipment, NZS10 million is needed for working capital and will be borrowed by the subsidiary from a New Zealand bank. The New Zealand subsidiary will pay interest only on the loan each year, at an interest rate of 8 per cent. The loan principal is to be paid in 3 years. In three years, the subsidiary is to be sold. S&S Ltd plans to settle the New Zealand loan by using the salvage value. The working capital will not be liquidated but will be used by the acquiring firm when it sells the subsidiary. S&S Ltd expects to receive NZ S28 million after subtracting capital gains taxes (Acquiring firm will not take the bank loan). Assume that this amount is not subject to a withholding tax. Forecast of demand for Kayak and other expenses. The project will be terminated at the end of Year 3 when the subsidiary will be sold. The price, demand, and variable cost of the product in New Zealand are as follows: Year Price NZS400 NZ$??? NZ$??? Demand 60,000 units ????? units ????? units Variable Cost NZS200 NZS??? NZS??? The expected inflation in New Zeeland is 10%, hence the selling price of Kayak and variable cost will increase by 10% every year. (Year 2 and year 3). The demand for the product expected to increase by 20% every year (Year 2 and year 3). The fixed costs, such as overhead expenses, are estimated to be NZS1,500,000 per year and assume it will not change due to inflation. The exchange rate of the New Zealand dollar is expected to be $0.55 at the end of Year 1, 50.60 at the end of Year 2, and $0.65 at the end of Year 3.