Question: 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

NMDC Ltd is considering a project in US, which will involve an

 

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%.

Step by Step Solution

★★★★★

3.44 Rating (163 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock

Foreigncurrency approach Foreigncurrency cash flows are d... View full answer

blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

1) Given an expected market return of 12.0%, a beta of 0.75 for Benson Industries, and a risk-free rate of 4.0%, what is the expected return for Benson Industries? A) 9.0% B) 10.0% C) 4.0% D) 13.0%...

Q:

A firm is considering the following two separate options. Option1. Build either a mini theme park or a 10 unit chalet on a parcel of land located by the beach side area. Adequate funding is...

Q:

For this assignment, you will analyze a second project and compare it to the "Brewery Expansion" project. This second potential project is described below. Suppose the same brewery is evaluating an...

Q:

Recent empirical evidence has suggested a strong increase in demand for low-quality baseballs. It is reported that this sudden increase in the demand for baseballs stems from the rise in the...

Q:

You are a U.S. investor and currently have a portfolio worth :100 million in German bonds. The current spot exchange rate is :2/$. The current one-year market interest rates are 6 percent in the euro...

Q:

International Foods Corporation, a U.S.-based food company, is considering expanding its soup-processing operations in Switzerland. The company plans a net investment of $8 million in the project....

Q:

Hindustan Motors has been producing its Ambassador car in India since 1948. As the companys Web site explains, the Ambassadors dependability, spaciousness and comfort factor have made it the most...

Q:

Consider the Vino project described in Exhibit T13.2. Suppose the international parity conditions do not hold with real rates of q = 12.0% and qV = 0.0%, and inflation of p = 5.0% and pV = 23.2%, so...

Q:

Lakonishok Equipment has an investment opportunity in Europe. The project costs 12.2 million and is expected to produce cash flows of 2.7 million in Year 1, 2.9 million in Year 2, and 3.5 million in...

Q:

Lakonishok Equipment has an investment opportunity in Europe. The project costs 19 million and is expected to produce cash flows of 3.6 million in Year 1, 4.1 million in Year 2, and 5.1 million in...

Q:

Use the following table, Present Value of an Annuity of 1 Period 8 % 9 % 10 % 1 0.926 0.917 0.909 2 1.783 1.759 1.736 3 2.577 2.531 2.487 A company has a minimum required rate of return of 8 %. It is...

Q:

A 2-kg block is dropped from a height of 1.5 m above the end of a vertical uncompressed spring, the force constant of which is 100 N/m. The block strikes the spring, compresses it and then rebounds....

Q:

Which of the following accounts decreases with a credit? A) Cash B) Common Stock C) Accounts Payable D) Unearned Revenue Which of the following accounts increases with a debit? A) Prepaid Rent B)...

Q:

Select the best answer. 1. Under the modied accrual basis of accounting, revenues cannot be recognized a. Until cash has been collected b. Unless they will be collected within 60 days of year-end c....

Q:

Between early 2008 and the beginning of 2009, a gradual stock-market downturn and plummeting home prices generated a substantial reduction in U.S. household wealth that induced most U.S. residents to...

Q:

Lisa earns $65,000 per year. She is married and claims three allowances. Use the wage bracket tables available online. a. If she is paid weekly, what is her withholding per paycheck? b. If she is...

Q:

Peter Diamond owed Carter $500,000 secured by a first mortgage on Diamonds plant and land. Stephens was a surety on this obligation in the amount of $250,000. After Diamond defaulted on the debt,...

Q:

Can you use Twitter activity to forecast box office receipts on the opening weekend? The following data (stored in Twitter Movies) indicate the Twitter activity ("want to see") and the receipts ($)...

Q:

solve A nurse is providing instruction to a client who has a new prescription for acetaminophen syrup 650 mg PO every hr PRN fever. The amount available is acetaminophen syrup 160 mg/5 mL. How many...

Q:

(b) 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...

Q:

(b) 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...

Q:

(b) 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...

Q:

(b) 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...

Q:

(b) 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...

Q:

(b) 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...