Japan also became a fast growth market for Beaver!. Executives at Beaver! know that Japanese buyers prefer goods from their own country. Therefore, the executives are currently considering to building a new factory in Japan..

The initial capital investment would be 100,000,000, or $C 1,000,000 at the current exchange rate of 100 = $C1. The management expects the free cash flow that could be repatriated from Japan would be 10,000,000 for the first year with a growth rate of 10% a year for 3 years. The terminal growth rate of the free cash flow is expected to be 3%. At the same time, Beaver!s financial advisor tells Beaver! that the yen will depreciate for the next 3 years at 5% a year after which it will stabilize.

With the project WACC equals to 11%.

a. Determine whether Beaver! should make such investment.

b. Determine whether Beaver! should invest if there is no devaluation of Japanese yen.

NEED A DETAILED EXPLANATION

INCLUDING THE CALCULATION OF DISCOUNT FACTOR. PLEASE SHOW THE NUMBERS IN EACH STEP FOR EASY EXPLANATION