Mr.X wants to invest in Bangladesh RMG.He plans to invest1million USD in a local factory based in
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Question:
Mr. X wants to invest in Bangladesh RMG. He plans to invest 1 million USD in a local factory based in Gazipur. The current exchange rate is BDT/ USD = 120. It’s a 5 yearlong investment with following expected cash flows:
1: 80,00,000;
2: 150,00,000;
3: 350,00,000;
4: 450,00,000;
5: 600,00,000
Mr. x is worried about a declining BDT. Hence he has gone into 5 forward exchange rate contracts that will be activated at the end of each year. The forward rate BDT/ USD are as follows:
1: 122;
2: 125;
3: 126;
4: 128;
5: 130.
He will convert all the cash flows back to USD using these exchange rates.
What is NPV of this investment
Related Book For
Modern Advanced Accounting In Canada
ISBN: 9781259066481
7th Edition
Authors: Hilton Murray, Herauf Darrell
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