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Blistech equipment, a company based in South Africa, is evaluating a project in the US and a potential arbitrage opportunity. Details are provided below. 1. The project requires an initial investment of $13 million and is expected to produce cash flows of $6 million in year 1, $7.5 million in year 2, -$2,5 million in year 3 and $4 million in year 4. The appropriate discount rate for the project is 15%, representing the company's South African adjusted cost of capital. The project is expected to be sold for $8 million at the end of year 4. The risk-free rate in the US and in South Africa are expected to remain the same over the next 4 years. 2. Blistech identified a potential triangular arbitrage opportunity between the Rand, the US dollar and the British pound. The current exchange rates are as follows: 1$ = R 15.50 1GBP= R 20.65 1$ = 0.73GBP 3. Blistech follows the home currency approach when evaluating foreign capital projects. It is expected that the Rand/Dollar exchange rate will be 1$=16,12 in a year's time. Ignore taxes in your calculations. Exchange rates are estimated using the uncovered interest parity condition. REQUIRED: 1.1 Calculate the NPV of the proposed project. 13 1.2 Advise Blistech whether an arbitrage opportunity exists. If it does, calculate 12 how much profit Blistech can make if it has R5 million to invest