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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
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 INR10,000,000 of annual free cash flow. The initial investment will be made on December 31, 2021, and cash flows will occur on December 31st of each succeeding year. 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 31st on the next six years are listed below: 202150INR/$202254INR/$202358INR/$202462INR/$202566INR/$202670INR/$ What is the net present value in USD
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