Please solve 13.11

equin percent are after-tax discount rates? 13.11 Consider the investment in Problem 13.1. The Chinese government insists that you build an airport near this project at a cost of CNY 100 million. Should you still accept the project? 1 2 1 2 Cross-border capital budgeting under the international parity conditions. 13.1 You work for an Israeli company that is considering an investment in China's Sichuan province. The investment yields expected after-tax Chinese new yuan cash flows (in millions) as follows: +CNY 200m +CNY500m +CNY 300m -CNY 600m Expected inflation is 6 percent in shekels and 3 percent in yuan. Required returns for this risk-class are ills = 15 percent in Israeli shekels and CNY = 11.745 percent in yuan. The spot exchange rate is S, HS/CNY = ILS 0.5526/CNY. Assume the international parity condi- tions hold. a. Calculate V, ILSCNY by discounting at the appropriate risk-adjusted yuan rate CNY and then converting into shekels at the current spot b. Calculate VILS;ILS by converting yuan into shekels at expected future spot rates and then discounting at the appropriate rate in shekels. rate