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Question 2: Farbucks is thinking of expanding to South Korea. The current indirect rate for dollars and South Korean won is 1025. It is assumed

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Question 2: Farbucks is thinking of expanding to South Korea. The current indirect rate for dollars and South Korean won is 1025. It is assumed that the expected inflation rate in South Korea should hover near 5% for the next five years, while the expected US inflation should stay around 3%. The discount rate for expanding is 15% for Farbucks. Given the following projected cash outflows and five-year inflows for the expansion project, Farbucks' financial controller used domestic NPV approached and concludes that the expansion is a go. You are required to confirm this position using Foreign Currency Approach and advise Farbucks whether they should expand to South Korea or not. Year 0: Initial investment costs of 82,000,000 won Year 1: cash flow: 25,000,000 won Year 2: cash flow: 30,000,000 won Year 3: cash flow: 70,000,000 won Year 4: cash flow: 90,000,000 won Year 5: cash flow: 45,000,000 won

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