ll alford to pay for the US affiliate? Show Question Three Kiwanda huru is a Kenyan MNC currently planning to invest in Tanzania Ksh. 2 billion in plant a surve o The Project life is 8 years and manufacturing. The management of Kiwand y for Ksh. 1 million and has come up with the following expectations: a huru has carried out lows after tax amounting to Tsh. 6 billion after charging Tsh. 2 billion as management fees and Tsh. I billion as royalties where the actual management costs amount to Ksh. 5 million by the head office. o The Tanzanian subsidiary also services a loan from the parent company where the charged interest is Tsh.0.2 billion per year but the actual costs to the parent company is only Ksh. 3 million o The firm is, however, worried that the future Tanzanian governments may nationalize all foreign enterprises like Kiwanda huru w were to happen, it is estimated it would occur at the end of the fifth year or never at all there after. It is assumed that if nationalization will take place, it will be after Kiwanda huru will have realized the fifth year s cash flows. Kiwanda huru has a political risk policy with ATIA which guarantees a compensation of 25% of the original investment value should nationalization occur before the seventh year. The insurance benefits will be realized a year after nationalization is effected. ithout compensation. If this o Given The firm s cost of capital is estimated to be 10%. o The current exchange rate is Tsh20/Ksh o Interest rate in Kenya is 16% p.a. o Interest rate in Tanzania is 9% p.a