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 2% 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 15% VND 30,000,000 Earnings after taxes VND 170,000,000

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 VND450,000,000 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.