Ms. Monica, who is CFO of Nexus Company, based in South Africa, is currently facing a critical dilemma regarding a potential investment opportunity in Nigeria which requires 100 million ZAR on machinery and other assets. As part of her investment appraisal, she must con potential profitability and risks associated with the project. However, one of her primary concerns revolves around foreign exchange fl and the expected rate of return. Despite seeing good economic prospects in Nigeria, she is apprehensive about the potential financial implications of investing in a foreign country. As a result, she must carefully weigh the risks and benefits associated with the project before making a final decision. Ultimately, her ability to evaluate the project's viability will be crucial in determining whether the investment is worth pursuing. The project is expected to yield the following profits after tax and depreciation over the next five years: Year 2 3 4 Earnings (in millions KES) 1 800 800 900 2 25.10 900 5 825 The assets must be depreciated at 20% (fixed instalment method). The salvage value at the end of a five-year period may be taken as zero. The foreign exchange rates of Nigerian Naira in terms of SA Rands are as follows: Year 0 1 3 4 5 NGN=1ZAR 25.20 25.35 24.94 24.75 24.46 The risk-free rate prevailing in South Africa is 5% with a market rate of return of 15% and an expected beta of 0.9. Ignore taxation. 1:49:54 Required: 1. You are required to calculate the net present value of the project and, based on the interpretation, advise management on an appropriate decision. (17 marks) Note: Present value of ZAR 1 at different rates of interest are as follows: 10% 12% 14% 16% 0.9091 0.8929 0.8772 0.8621 0.8264 0.7972 0.7695 0.7432 0.7513 0.7118 0.6750 0,6407 0.6830 0.6355 0.5921 0.5523 0.6209 0.5674 0.5194 0.4761 Year 1 2 3 4 5