5. Assume that it is now Jan. 2017. AZDT Inc. (US) expects to receive cash dividends...

5. Assume that it is now Jan. 2017. AZDT Inc. (US) expects to receive cash dividends from a joint venture in India over the next five years. The first dividend of Rs 2 million will be paid in Dec. 2017. The dividend is then expected to grow at an annual rate of 10% over the following four years.

Current exchange rate (Rs/$) is 45 (65.25) and AZDT’s average weighted cost of capital is 10%.

a. Compute the dollar present value of the expected rupee dividend stream if the dollar is expected to depreciate by 5% per year against the rupee over the investment period.

b. Obtain the dollar present value of the expected rupee dividend stream if the rupee is expected to depreciate by 10% per year against the dollar over the investment period

c. What is the dollar present value of the expected rupee dividend stream if the exchange rate remains constant over the investment period?

Expert Solution

I dont find any use of 65.25. I think it is mentioned extra(By mistake) . Thats why i considered 45/$ as rate at T_0. Please give feedback whether you like answer or not. Sorry for overwriting.

jeff jeffy answered 3 months ago

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