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Please do asap (a) Stanhope Pharma ltd is a Multinational Company and it is evaluating foreign investment proposal. Stanhope Pharma Itd exports of pharmaceutical products
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(a) Stanhope Pharma ltd is a Multinational Company and it is evaluating foreign investment proposal. Stanhope Pharma Itd exports of pharmaceutical products have increased to such an extent that it is considering a project to build a plant in United States. The project will entail an initial outlay of $100 million and is expected to generate the following cash flows over its 4 years life. Year Cash Flow in Million $ 1 30 2 40 3 50 4 60 The current spot exchange rate is Rs 45/US$, the risk-free rate in Mauritius is 11% and the risk free rate in United States is 6%. These are rates observed in the financial markets. Stanhope Pharma ltd required rate of return is 15%. Required: Using the Home Currency Approach and the Foreign Currency Approach advice whether Stanhope Pharma ltd can undertake this projectStep by Step Solution
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