Galaxysite is considering a project in Bulgaria costing 3,700,000 Bulgarian Lev to start up. GalaxySite is planning to sell in 3 years. The Bulgarian cash flows (after tax) for the next 3 years is expected to be BL 600,000 , BL 1,300,000, and BL 1,500,000 ,respectively. Galaxysite expects to sell the company for BL4,500,000 at the end of the 3rd year. The required rate of return is 16%. The spot rate is BL1 = $0.63. The Lev is expected to be $0.60, $0.57, and $0.59 over the next three years.

(1).- What is the NPV?

(2).-Using the above information, assume the cash flows in years 1 and 2 are blocked until year 3. the blocked funds can be invested at 4%. What is the NPV of the project with blocked funds?

(3).- Return to the original scenario (don't assume blocked funds). What is the break-even salvage value in Bulgarian Lev?