Lexington Corp., a U.S. firm, currently has no existing business in New Zealand but is considering establishing a subsidiary there to serve the local market there. The following information has been gathered to assess this project. The initial investment required is 20 million New Zealand dollars (NZ$). The project will be terminated at the end of year 5, when the subsidiary will be sold. The current spot rate of the New Zealand dollar is quoted as: USD/NZD = 0.6712 and for now it is assumed to remain constant until the end of the project. The after-tax earnings of the subsidiary are estimated to be NZ$1,500,000; NZ$2,750,000; NZ$3,900,000; NZ$5,000,000 and NZ$6,250,000 at the end of years one, two, three, four, and five respectively. The New Zealand government will impose a withholding tax of 10 percent on remitted earnings by the subsidiary. All cash flows received by the subsidiary are to be sent to the parent at the end of each year. The salvage value to be received is NZ$10 million. Lexington requires an 15% rate of return on this project.