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In: Finance

You are considering a project in South Korea. The cash flows are in South Korean won...

You are considering a project in South Korea. The cash flows are in South Korean won (KRW). Given your current estimates of the future spot rate of USD/KRW, the NPV is positive. Explain why you should proceed with the project.
If you think the South Korean won will appreciate more against the dollar than what you originally estimated will this make it more or less likely that you proceed with the project Explain.  

Solutions

Expert Solution

1.
Assuming when we say NPV is positive, we mean that the NPV is USD is positive. We should accept the project as it adds value to the firm because NPV is greater than zero

2.
If South Korean won appreciates more than expected, the NPV in USD will increase because same Korean cash flows now give higher USD. Hence, it makes more likely to accept the project.

jeff jeffy answered 2 years ago
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