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NMDC Ltd is considering a project in US, which will involve an initial investment of US $55,00,000. The project will have 5 years of life. Current spot exchange rate is 48 per US $. The risk free rate in US is 8% and the same in India is 12%. Cash inflows from the project are as follows - Years 1 2 3 4 5 Cash Inflow (US $) 10,00,000 12,50,000 15,00,000 20,00,000 25,00,000 Calculate the NPV of the project using foreign currency approach. Required rate of return on this project is 14%. NMDC Ltd is considering a project in US, which will involve an initial investment of US $55,00,000. The project will have 5 years of life. Current spot exchange rate is 48 per US $. The risk free rate in US is 8% and the same in India is 12%. Cash inflows from the project are as follows - Years 1 2 3 4 5 Cash Inflow (US $) 10,00,000 12,50,000 15,00,000 20,00,000 25,00,000 Calculate the NPV of the project using foreign currency approach. Required rate of return on this project is 14%.
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Foreigncurrency approach Foreigncurrency cash flows are d... View the full answer
Related Book For
Principles of Corporate Finance
ISBN: 978-0077404895
10th Edition
Authors: Richard A. Brealey, Stewart C. Myers, Franklin Allen
Posted Date:
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