Question 3 Use Excel for this entire question. A Singapore company is investing GBP 400,000 in an investment project. The project is expected to generate the following cash flows for the next two years. Year 0.5 1.0 1.5 2.0 Cash flow amounts 40,000 80,000 140,000 180,000 (GBP) The GBP ZCYC is given as follows: (a) (b) Tenor Rate (96) 0.5 1.0 1.5 2.0 0.13% | 0.27% || 0.37% | 0.55% Compute the NPV and IRR of this investment. Conclude, if the company should participate in this investment. Suppose that the cost of capital for the Singapore company is 7.0% (i) Should the company go ahead with the investment project? (ii) (16 marks) What is the maximum initial investment amount for the project to be profitable? SINGAPORE UNIVERSITY OF SOCIAL SCIENCES (SUSS) FIN201 (c) (8 marks) Tutor-Marked Assignment As the company does its accounting denominated in SGD, describe how the profitability of the project will change as GBP weakens. Suggest a suitable financial instrument that the company can use to hedge its FX risk. State any assumptions you have made. (4 marks) (Total: 28 marks)