1. Use the following information to answer the next three questions:

Compact Computers, Inc., a video game development company, has decided to build production capability in the Philippines. At the moment, only the following summary of expected after tax cash flows is available.

Year 0 1 2 3

Peso cash inflows 718,800 712,400 812,400

Peso cash outflows 45,000 29,600 24,200 64,300

$ cash outflows 21,000 1,150 2,200 3,700

The exchange rate today is P56.3628/$. Whiz expects the peso to depreciate by 4% per year against the U.S. dollar for the coming three years. The WACC for Whiz Computers is 12%.

Fundamental and Powerful Concept 10: Calculate the currency rate at the end of year 2.

Year 1: 1.04 * 56.3628 = 58.617312

Year 2: 1.04 * 58.617312 = 60.9620

1. P51.9440/$

2. P61.1576/$

3. P60.9620/$

4. P52.1106/$

5. None of the above

2. What is the present value of the net dollar cash flows that are generated at the end of year three?

1. $6,435.93

2. $5,724.88

3. $10,678.23

4. $7,207.47

5. $6,450.47

3. If the cash flows are as follows: $21,798.40 outlay at time point zero, $10,588.80 in year one, $9,032.89 in year two, and $8,043.04 in year three, calculate the NPV of the project at time point zero.