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Mazengo Corporation currently has no existing business in German but is considering establishing a subsidiary there. The following information has been gathered to assess this project. The initial investment capital required to start the project would be Euro 50 Million to be used to buy plant and equipment. The plant is expected to have a usefully life of 10 years and would be depreciated using a straight line method, the project would be terminated at the end of year 3 when the subsidiary would be sold. Mazengo expects to receive Euro 35 Million when it sells the subsidiary. This would be equal to the book value at the end of year 3. The current spot exchange rate is TZS 1700 and it is estimated that the risk free interest rate in Tanzania is 12% and in German is 10% 30 The price demand and variable cost of the product in German are as follow Year Price (Euro) Demand Variable costs (Euro) 500 40,000 511 50,000 35 530 60,000 The fixed costs such as overheads expenses are estimated to be Euro 6 Million per year. All cash flows received by the subsidiary are to be sent to the parent company at the end of each year. The German government would impose an income tax of 30%. The Tanzania government would allow a tax credit on remitted earnings and would not impose any additional taxes. Mazengo requires a 15% rate of return on this project Required: Should Mazengo accept the project or not? Justify your