Kalamazoo Marine wants to expand its operations to New Zealand. The current indirect exchange rate is 1.75

Question:

Kalamazoo Marine wants to expand its operations to New Zealand. The current indirect exchange rate is 1.75 for U.S. and New Zealand dollars. The anticipated inflation rate is 3.8% in the United States, but only 1.75% in New Zealand. The discount rate in the United States for the expansion project is 16%. If the following after-tax cash flows have been forecasted for the expansion project in NZ$, should Surfboards USA expand to New Zealand:

Investment: NZ$ 60,000,000

Cash Flows: . Year 1 – NZ$7,000,000

Year 2 – NZ$10,000,000

Year 3 – NZ$ 25,000,000

Year 4 – NZ$ 19,000,000

Year 5 – NZ$ 17,000,000

Year 6 – NZ$ 5,000,000

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal... Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...