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Suppose a firm has just made an investment in the Congolese Republic that will generate 2 million annually in depreciation, converted at todays spot rate.
Suppose a firm has just made an investment in the Congolese Republic that will generate 2 million annually in depreciation, converted at todays spot rate. Projected annual rates of inflation in the Congolese Republic and in the Eurozone are 7% and 4%, respectively. If the real exchange rate is expected to remain constant and the Congolese Republic tax rate is 50%, what is the expected real value (in terms of todays euros) of the depreciation charge in year 5, assuming that the tax write-off is taken at the end of the year?
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