Please explain/show how to do this using a financial calculator and some paper, step by step. NOT excel. Thank you!

Problems and Short-Answer Questions:

1. Assume that Baps Corporation is considering the establishment of a subsidiary in Norway. The initial investment required by the parent is $6,000,000. If the project is undertaken, Baps would terminate the project after four years. Baps cost of capital is 10%, and the project is of the same risk as Baps existing projects. All cash flows generated from the project will be remitted to the parent at the end of each year. Listed below are the estimated cash flows the Norwegian subsidiary will generate over the projects lifetime in Norwegian kroner (NOK):

Year 1 Year 2 Year 3 Year 4

NOK 10,000,000 NOK 15,000,000 NOK 17,000,000 NOK 30,000,000

The current exchange rate of the Norwegian kroner is $0.135. Baps exchange rate forecast for the Norwegian kroner over the projects lifetime is listed below:

Year 1 Year 2 Year 3 Year 4

$0.13 $0.14 $0.12 $0.15

1. What is the net present value (NPV) of the Norwegian project? Whats the investment decision? (10)
2. If the cost of capital were 15% compute the revised NPV. Does your decision change now? (5)