Answered step by step
Verified Expert Solution
Question
1 Approved Answer
TWIGA Inc. constructed a manufacturing plant in Tanzania. The construction cost 9 Billion TZS. TWIGA intends to leave the plant open for three years. During
TWIGA Inc. constructed a manufacturing plant in Tanzania. The construction cost 9 Billion TZS. TWIGA intends to leave the plant open for three years. During the three years of operations, TZS Cash flows are expected to be TZS 3 Billion, TZS 3 Billion and TZS 2 Billion respectively. Operating cash flows will be given one year from today and are remitted back to the parent at the end of each year. At the end of the third year, TWIGA expect to sell the plant for TZS 5 Billion. TWIGA has a required rate of return of 17%. It currently takes TZS 8700 to buy 1 USD and the TZS is expected to depreciate by 5% per year. Required; a) Determine NPV for this project. Should TWIGA build the plant? b) How would your answer change if the value of the TZS was expected to remain unchanged from its current value of TZS 8,700 per USD over the course of the three years? Should TWIGA construct the plant then
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started