A finance company invests in two different countries, India and China, and requires a 20% rate of return (before taxes) in US dollars on project investments in these two countries.
a. If the project in India is projected to average 8% annual devaluation relative to the dollar, what rate of return (in terms of currency in use there) would be required for the investment?
b. If the dollar is projected to devaluate 5% annually relative to the currency of China, what rate of return (in terms of currency in use there) would be required for the investment?