1. Answer Natural Mosaic. It is found in chapter 18, and it is number 18.4. Do both the project and the parent points of view.

2. Redo the problem in one presupposing that the rupee exchange rate appreciates with the values given. Thus, the rupee to dollar rate is 96,92,88,84,80 and 76 rupees for a dollar for the years 2021, 2022, 2023, 2024, 2025 and 2026, respectively. You ought to answer both parent and project viewpoints.

3. Compute the WACC of a hypothetical firm, if you know the return in the market, the risk free rate, the cost of debt and unlevered bheta are .12, .02, .08 and 1, and the weights of debt and equity are 40% and 60%, respectively domestically. In the foreign nation, respective values are .14, .04, .1, 1.3, 70% and 30%. Assume debt and equity of the project abroad are .7 and .3. Additionally, assume .8 is financed abroad and .2 is financed in the US of the total debt.

Natural Mosaic Company (U.S.) is considering investing Rupees 50,000,000 in India to create a wholly owned tile manufacturing plant to export to the US market. After five years, the subsidiary would be sold to Indian investors for Rs100,000,000. A pro forma income statement for the Indian operation predicts the generation of Rs7,000,000 of annual cash flow, is listed in the following table. The initial investment will be made on December 31,2011 , and cash flows will occur on December 31st of each succeeding year. Annual cash dividends to Philadelphia Composite from India will equal 75% of accounting income. The U.S. corporate tax rate is 40% and the Indian corporate tax rate is 50%. Because the Indian tax rate is greater than the U.S. tax rate, annual dividends paid to Natural Mosaic will not be subject to additional taxes in the United States. There are no capital gains taxes on the final sale. Natural Mosaic uses a weighted average cost of capital of 14% on domestic investments, but will add six percentage points for the Indian investment because of perceived greater risk. Natural Mosaic forecasts the rupee/dollar exchange rate for December 31st on the next six years are listed below