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Tesla. has a unique opportunity to invest in a two-year project in Australia. The project is...

Tesla. has a unique opportunity to invest in a two-year project in Australia. The project is expected to generate 1,700,000 Australian dollars (A$) in the first year and A$2,700,000 in the second. Tesla would have to invest $3,000,000 in the project. Tesla has determined that the cost of capital for similar projects is 16 percent. What is the net present value of this project if the spot rate of the Australian dollar for the two years is forecasted to be $.65 and $.70, respectively (5 Points)?

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Expert Solution

In this Question, we need to first bring Investment and cash generated to a common currency using spot rates provided. Therefore we converted cash generated in each year from Australian Dollar to USD by multiplying it with spot rate. Post conversion, Cash generated is discounted using the Cost of Capital, and NPV is calculated.

Please find the working attached :

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jeff jeffy answered 1 year ago
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