Question
In: Finance
AmTec is considering to set up a subsidiary in Brazil. The initial investment is $1 million....
AmTec is considering to set up a subsidiary in Brazil. The initial investment is $1 million. If the project is undertaken, AmTec needs to determine the project feasibility for its four years operation there. Due to political uncertainly and great financial opportunity, AmTec’s cost of capital is 6%, and Brazil’s country risk premium 5%. All cash flows generated from the project will be remitted to the parent at the end of each year. Listed below are the estimated cash flows subsidiary will generate during four years in Brazil real and forecast exchange rates over the same period. (Assume year 0 exchange rate $0.30 per real.) Q: What is the net present value of this project? What is breakeven NPV?
Step by step explanation please
|
Year1 |
Year2 |
Year3 |
Year4 |
|
|
Cash flow to parents in Brazil real |
800,000 |
900,000 |
1,500,000 |
2,000,000 |
|
Exchange rates USD per real |
0.29 |
0.28 |
0.32 |
0.34 |
Solutions
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