Regeneron is assessing the possibility of a new investment in its factory in Norway. The aim is to expand the production of newly discovered monoclonal antibodies for the cure of Covid-19. Within three years, Regeneron wants to make this product available to everybody and to a lower cost.

The initial investment is 100 million NOK and will last for three years. Revenues forecasts are 40 million NOK for the first two years and 50 million the last year. The costs will be 8 million NOK the first year then, they reduce by 5% per year in each of the remaining two years. The investment has to be depreciated equally over the three years.

The current spot exchange rate is S0(NOK/USD) = 9 and the inflation rates in US and Norway are 1% and 2%, respectively.

Determine the APV of the project in US dollars by computing the APV in NOK first and then convert it to US dollars using the current spot exchange rate, S(NOK/USD). For your computations, assume an unlevered return on equity in Norway of 15% and the return on debt (cost of debt) in Norway is 5%.