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please show work if possible Delta Company, a U.S. MNC, Is contemplating making a foreign capital expenditure in South Africa. The initial cost of the
please show work if possible
Delta Company, a U.S. MNC, Is contemplating making a foreign capital expenditure in South Africa. The initial cost of the project is ZAR13,200. The annual cash flows over the five-year economic life of the project in ZAR are estimated to be 4,080, 4,960, 5,950, 6,940, and 7,800. The parent firm's cost of capital in dollars is 9.5 percent. Long-run Inflation is forecasted to be 3 percent per annum in the United States and 7 percent in South Africa. The current spot foreign exchange rate is ZAR/USD = 3.75. a. Calculating the NPV In ZAR using the ZAR equivalent cost of capital according to the Fisher effect and then converting to USD at the current spot rate. Answer is complete but not entirely correct. NPV in USD using fisher effect 15 b. Converting all cash flows from ZAR to USD at purchasing power parity forecasted exchange rates and then calculating the NPV at the dollar cost of capital. Answer is complete but not entirely correct. NPV in USD using PPP rates 15 c. Are the two dollar NPVS different or the same? Different Same d. What is the NPV in dollars if the actual pattern of ZAR/USD exchange rates Is: S(0) -3.75, S(1)-5.7. S(2) - 6.2. S(3) - 6.5, S(4)=6.9, and S(5)-6.9? (Negative amount should be shown with a minus sign.) Answer is complete but not entirely correct. NPV in USD using actual pattern S 153 Step by Step Solution
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