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You are the chief financial officer of Meridian Gold, a New Zealand gold mining company with operations in PNG. Your capital budgeting department has presented
You are the chief financial officer of Meridian Gold, a New Zealand gold mining company with operations in PNG. Your capital budgeting department has presented a proposal to you for a 5-year ore-extraction project in PNG. Your team has converted future Kina cash flows to NZD cash flows using forward rates. The expected year-end net NZD cash flows are as follows: Year 1 2 Net Cash Flow NZ$100,000 200,000 250,000 250,000 250,000 3 4 5 After consulting your advisers, you decide that the probability of expropriation is 10%. Also assume that there is no compensation in the case of expropriation. What is the probability adjusted cash flow in year 5? Please provide your answer as an integer, for example 123456. The probability adjusted cash flow in year 5 is $ The NZD discount rate for a gold mining project is 6%. The credit default swap spread for USD bonds issued by PNG government is 4.5%. The NZD discount rate for probability-adjusted cash flows in this project is %. (Provide your answer with two decimal points, or in the format of x.xx)
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