The present value of the cash inflows calculated:

Year 1: 2 million MDL / (1+10%)^1 = 1.818 million USD Year 2: 2 million MDL / (1+10%)^2 = 1.653 million USD Year 3: 2 million MDL / (1+10%)^3 = 1.503 million USD Year 4: 2 million MDL / (1+10%)^4 = 1.368 million USD Year 5: 2 million MDL / (1+10%)^5 = 1.245 million USD

The present value of the cash outflows would be 10 million MDL / (1+10%)^1 = 9.091 million USD.

NPV = (1.818 + 1.653 + 1.503 + 1.368 + 1,245) - 9.091 = $-2.503 million

Exchange rate to 1 U.S dollar = 20 Moldovan leu, now the cash inflows and outflows will be the same, but the conversion rate would change.

Year 1: 2 million MDL / (1+10%)^1 = 1.667 million USD Year 2: 2 million MDL / (1+10%)^2 = 1.521 million USD Year 3: 2 million MDL / (1+10%)^3 = 1.383 million USD Year 4: 2 million MDL / (1+10%)^4 = 1.259 million USD Year 5: 2 million MDL / (1+10%)^5 = 1.147 million USD

The present value of the cash outflows would still be 9.091 million USD.

NPV = (1.667 + 1.521 + 1.383 + 1.259 + 1.147) - 9.091 = -3.113 million USD

The NPV decreased as a result of the U.S dollar appreciation, showing that the project is less profitable in U.S dollars.

Would you invest in this from the information of the NPV?

Answer rating: 100% (QA)

Based on the information provided the Net Present Value NPV of the project is negative whether it is ... View the full answer