You are considering opening a subsidiary in Vietnam. The following cash flows are projected for the next five years. The spot rate for the Dong is $0.14/VND. The dollar is expected to depreciate 3% per year for the next five years.

Sales VND 1,000,000,000 Variable Costs VND 600,000,000 Fixed Costs VND 100,000,000 Royalties VND 100,000,000 Earnings before taxes VND 200,000,000 Taxes 20% VND 40,000,000 Earnings after taxes VND 160,000,000

You expect to make dividend payments of 75% every year to the parent. Dividends repatriated to the U.S are subject to 5% withholding tax. Royalties sent back to the parent should be considered as cash flows from the parent's perspective. If the total investment from the parent company is $60,000,000 in year 0, is the project acceptable from the parent's point of view? Assume the required rate of return on this project is 18%. The U.S. tax rate is 40%. Explain the result.