Your firm is interested in making an investment in The UK$.$ The required initial investment is $1$ billion and is expected to produce cash flows of $100$ million in Year $1,200$ million in Year $2,300$ million in Year $3,400$ million in Year $4,$ and $500$ million in Year $5.$

The investment can be depreciated to zero by a straight line method in $5$ years. The current spot exchange rate is $$1\mathrm{.}50/1,$ and current risk$-$free rates in Canada and The UK are $6\%$ and $4\%$ respectively.

The weighted average cost of capital for your company is $12$ percent and this rate is considered to be the appropriate discount rate for the projects undertaken by your company in Canada. You believe that this rate is also appropriate to discount the cash flows of the project under consideration. The assets for this project are expected to be sold for $100$ million at the end of the fifth year. The company must pay $20\%$ corporate tax to the government in The UK$.$

$($a$)$Should your firm undertake the investment? Show your work clearly.

$($b$)$Is it reasonable to use the same discount rate for this project as you use for your domestic projects? What other factors should be considered in determining the discount rate for international projects, both in general and in this case?

$($c$)$If you need to borrow $1$ billion for this investment and you are able to obtain this loan at the same rate in either country, in which country would you borrow? Why? What are advantages and disadvantages of borrowing in Canada as opposed to The UK$?$ How would you deal with the disadvantages?