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Mr. Muwanga is a Ugandan investor who is considering investing in Tanzanian market. A local consultany firm in Dar Es salaam provided the following information
Mr. Muwanga is a Ugandan investor who is considering investing in Tanzanian market. A local consultany firm in Dar Es salaam provided the following information to him: i) Initial investment will be TZS200 million in Year 0 ii) After tax expected cash flows in TZS from year 1 to Year 4 will be (millions): 100, 125, 150 and 150. iii) The current spot rate is 0.560 TZS/1.00UGS iv) The Uganda risk free rate is 6%, while it is 9% in Tanzania. Required: a) determine the expected spot rate of exchange for the next four years between the TZS and the UGS. b) Evaluate the investment proposal to Mr. Muwanga using the Net Present Value approach
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