Please solve 13.9

porate income tax rate is 25 percent. 13.9 Consider the investment in China from Problem 13.1. Suppose each cash flow generated by the project must be loaned to the China Construction Bank for one year at a zero percent interest rate. China Construction Bank bonds have a yield of 6.09 percent in yuan. China's corporate income tax rate is 25 percent. At what yuan rate should you discount the opportunity cost of these blocked funds? What is the opportunity cost of blocked funds in yuan? 12 10 Consider the 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 +CNY300m -CNY600m 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, ILS/CNY = ILS 0.5526/CNY. Assume the international parity condi- tions hold. a. Calculate V, ILS|CNY by discounting at the appropriate risk-adjusted yuan rate CNY and then converting into shekels at the current spot b. Calculate V, SpilLS by converting yuan into shekels at expected future spot rates and then discounting at the appropriate rate in shekels. rate