Farbucks is thinking of expanding to South Korea The current
Farbucks is thinking of expanding to South Korea. The current indirect rate for dollars and South Korean won is 1025. The inflation rate in South Korea is expected to hover near 0.5% for the next five years. The U.S. inflation rate is expected to stay around 3.0%. The discount rate for expanding is 15% for Farbucks. Given the following projected cash flows for the expansion project and using the domestic NPV approach, should Farbucks expand to South Korea?
Cash Flows: Year 0, initial investment costs Won 82,000,000 per coffee shop
Year 1, – Won 25,000,000
Year 2, Won 30,000,000
Year 3, Won 70,000,000
Year 4, Won 90,000,000
Year 5, Won 45,000,000

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