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solve the followring {20 marks} JohnSmith Products, a Canadian auto part manufacturing firm, has an investment opportunity in Europe. The project costs 18 million and

solve the followring

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{20 marks} JohnSmith Products, a Canadian auto part manufacturing firm, has an investment opportunity in Europe. The project costs 18 million and is expected to have cash flows as follows for three years. And the subsidiary can be sold at the end of three years for 127 million. The following is the summary of the financial information between Canada and Europe. Initial Invest -18,000,000 CF1 3,600.000 CF2 4,100,000 CF3 5, 100,000 Terminal value at the end of Year 3 12,700,000 Spot exchange rate (SO) 1.1 1CAD/ Risk-free rate in Canada 0.038 Risk-free rate in Europe 0.029 Cost of capital in Canada 0.105 Answer the followings: a. Compute the forward exchange rates for the Year 1, Year 2, and Year 3. b. Compute the NPV of this project

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