Natural Mosaic Company (U.S.) is considering investing INR50,000,000 in India to create a wholly owned tile manufacturing plant to export to the European market. After five years, the subsidiary would be sold to Indian investors for INR100,000,000. A pro forma income statement for the Indian operation predicts the generation of INR7,000,000 of annual cash flow, is listed in the following table.

Sales Revenue: INR30,000,000

Less cash operating expenses: 17,000,000

Gross Income: 13,000,000

Less depreciation expenses: 1,000,000

Earnings before interest and taxes: 12,000,000

Less Indian taxes at 50%: 6,000,000

Net Income: 6,000,000

Add back depreciation: 1,000,000

Annual cash flow: INR 7,000,000

The initial investment will be made on December 31, 2021, and cash flows will occur on December 31 of each succeeding year. Annual cash dividends to Natural Mosaic from India will equal 75% of accounting income. The U.S. corporate tax rate is 21% and the Indian corporate tax rate is 25%. Because the Indian tax rate is greater than the U.S. tax rate, annual dividends paid to Natural Mosaic will not be subject to additional taxes in the United States. There are no capital gains taxes on the final sale. Natural Mosaic uses a weighted average cost of capital of 14% on domestic investments but will add six percentage points for the Indian investment because of perceived greater risk. Natural Mosaic forecasts the Indian rupee to U.S. dollar exchange rate for December 31 on the next six years are listed as follows.

INR = USD1.00

therupee to dollar rate is 70, 66, 62, 58, 54 and 50 rupees for a dollar for the years 2011, 2012, 2013,2014, 2015 and 2016, respectively