A US-based MNC is considering establishing a three-year project in Canada with a $60 million initial investment. The required rate of return on this project is 15%. The firm is to projected to generate operating cash flows of C$20 million in Years 1 and 2, and C$50 million in Year 3, and is expected to have a salvage value of C$30 million.

The MNC must pay a 25% tax on remitted funds, and the stable exchange rate is C$1.02 per US$ over the next two years and a rate of C$ 1.025 per US$ in Year 3.

All cash flows are remitted to the parent and there is no tax on salvage.

Required:

1. Calculate the after-tax operating cash flows that will be remitted to parent company each year.
2. Calculate the Net Present of the project
3. Explain whether or not the MNC should accept the project.

No excel