Your company is contemplating on investing in a manufacturing facility in China. You are charged with doing the financial analysis for this project. You expect the cash flows (in Chinese RMB) for this project to last indefinitely. You estimated the following cash flows for 2020-2025 and that the cash flows will grow at a constant rate starting 2026. (12 points) Year FCF Other Data 2020 -80,000,000 RMB Growth rate of RMB FCF starting 2026 = 3% 2021 6,000,000 RMB Cost of Capital for similar U.S. Projects (WACC) = 10% 2022 7,000,000 RMB Inflation in the U.S. = 2% 2023 2024 2025 10,000,000 RMB 12,000,000 RMB 15,000,000 RMB Inflation in China = 7% Spot rate = 6.5 RMB/USD

What is the USD NPV for this project? (Please show your calculation converting RMB NPV to USD NPV.)

What are the i) RMB cost of capital, and ii) RMB NPV if inflation in China rises to 8% and the U.S. inflation drops to 1%?