You work for a firm whose home currency is the Brazilian real (BRL) and that is considering a foreign investment. The in

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You Work For A Firm Whose Home Currency Is The Brazilian Real Brl And That Is Considering A Foreign Investment The In 1 (49.4 KiB) Viewed 85 times

You work for a firm whose home currency is the Brazilian real (BRL) and that is considering a foreign investment. The investment yields expected after-tax United States dollar (USD) cash flows (in millions) as follows: Year 0 -USD1,000 Year 1 USD500 Year 2 USD500 Year 3 USD500 : Expected inflation is 9.0% in the Brazilian real and 12.0% in the United States dollar. Assume that the international parity conditions hold. Required returns for projects in this risk class are: . BRL - 12.0% in Brazilian real; and ¡USD = 15.083% in United States dollar The spot exchange rate is BRL/USD BRL 3.8458/USD. The project country's government has United States dollar-denominated bonds outstanding that currently yield 6.09% per annum. Your firm pays a marginal corporate tax rate of 25% on its United States dollar profits, which is the same marginal tax rate that your firm pays on its parent company profits in Brazilian real. Question 15 Suppose that all of the United States dollar cash flows generated by the project must be loaned to the country's government at an interest rate of 0% per annum for a period of exactly one year after they are generated by the project. Factoring in the opportunity cost of the blocked funds, what is the NPV of the project?