Several years ago, you decided to use your knowledge of chemistry and cooking for the forces of good and started a microbrewery company, Breaking Bad Brewery. Around the same time, you visited China for the first time to attend a friends wedding. During your time there, you noticed a fledging microbrewery industry starting to take hold in the country. You took the great leap and decided to participate in the quickly growing industry there by building a brewery operation in the outskirts of Chengdu (because beer goes well with spicy Sichuan food). Your recipes were a hit in the Chinese market and your company grew quickly, resulting in the need for capital and taking the firm public to do so. Breaking Bad Brewery is now a household name across China, Park City, and southern Utah (where investors in the firm were made millionaires). In a recent foray to Russia, you noticed Russians would like a lighter alcohol to substitute with their vodka consumption. You quickly had some of Breaking Bads beers shipped to Russia for a marketing study that wound up costing a total of US$30,000. The study showed there would be a huge demand for several of the recipes Breaking Bad produces, particularly Blue Sky IPA, Walters White Belgian Ale, El Camino Blonde, and Heisenberg Hefeweizen.

You, as the CEO of Breaking Bad Brewery, Incorporated, determined that it would be more cost effective to expand the Chengdu brewery and ship beer to Russia then to build a new brewery in Russia. You expect to sell 2,000,000 bottles of beer per year at a price of 180 Russian rubles (RUR) per bottle. To be conservative, you estimate no annual growth in sales. The expansion can be finished by year-end, would cost 35,000,000 Chinese yuan (CNY), and would require additional net working capital of 16,200,000CNY (which the firm would recover when the project ends). The expansion will depreciate the net capital spending in US$ by straight line to zero over ten years. Your raw materials (wheat, barley, hops, etc.) are imported from Australia and must be paid for in Australian dollars (AUD). So, the variable costs are 0.45AUD/bottle for the raw materials and 5.0CNY/bottle for the actual brewing process and shipping costs. The fixed costs associated with the expansion total 1,000,000CNY per year. You believe you can sell off the expansion to a contract brewer for 15,000,000CNY. Breaking Bad Brewery, Inc. has no debt, and has enough cash to fund the expansion. Their cost of capital in the US is 14%. The firm has an effective tax rate of 26%.

Since so many currencies are involved in this project, compute the NPV in dollars using the home country approach of capital budgeting. Use the approximate interest rate parity formula to forecast exchange rates. Get spot exchange rates here: https://www.xrates.com/table/?from=USD&amount=1 and the one-year risk free rates from the 52-week YTM on each countries bonds here: https://tradingeconomics.com/bonds.

What is the maximum initial RUR/$ spot exchange rate where the project is still acceptable? What is the minimum initial CNY/$ spot exchange rate where the project is still acceptable? What is the minimum risk free rate in Australia where the project is still acceptable?