Question

MNO (Japanese firm) is considering investing in a four year project that costs 22 million yen. MNO expects to receive 7 million yen and 20,000 pesos each year the project is in operation. The expected yen/peso exchange rate for each of the next four years is ¥5.5/peso in year one, ¥5.25/peso in year two, ¥6/peso in year three and ¥4.5/peso in year four. Find the net present value of the project (in yen) if the appropriate discount rate is 15%. Round intermediate steps to four decimals and your final answer to two decimals. Do not use currency symbols when entering your response.

I need the answer ASAP

Answer 1

A	B	C	D	E	F	G	H	I	J	K
2
3		First cash flow needs to be converted into Yen and then the NPV of the cash flow needs to be calculated:
4		Year	0	1	2	3	4
5		Initial investment	-¥7,000,000
6		Cash Inflow (Peso)		20,000	20,000	20,000	20,000
7		Exchange rate (Yen per peso)		5.5	5.25	6	4.5
8		Cash Inflow (Yen)		¥110,000	¥105,000	¥120,000	¥90,000	=H6*H7
9		Free Cash Flow	-¥7,000,000	¥110,000	¥105,000	¥120,000	¥90,000
10
11		Calculation of NPV:
12
13		NPV of the project is present value of future cash flows discounted at required rate of return less the initial investment.
14		Given the following cash flow and WACC, NPV for the project can be calculated as follows:
15		Year	0	1	2	3	4
16		Free Cash Flow (FCF)	-¥7,000,000	¥110,000	¥105,000	¥120,000	¥90,000
17		Discount rate (i)	15%
18		(P/F,i,n) for each year		0.87	0.76	0.66	0.57	=1/((1+$D17)^H15)
19		Present Value of cash flows = FCF*(P/F,i,n)		¥95,652	¥79,395	¥78,902	¥51,458	=H16*H18
20		Present value if future cash flows	¥305,407	=SUM(E19:H19)
21
22		NPV for Project	=Present value fo future cash flows - Initial investment
23			-¥6,694,593	=D54+D50
24
25		Hence NPV of the project is	-¥6,694,593
26