You work for Funky Turtle Limited, which is a firm whose home currency is the Chilean...

 

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You work for Funky Turtle Limited, which is a firm whose home currency is the Chilean peso (CLP) and that is considering a foreign investment. The investment yields expected after-tax Japanese yen (JPY) cash flows (in millions) as follows: Year 0 -JPY800 Year 1 JPY425 Year 2 JPY425 Year 3 JPY425 Expected inflation is 6.0% in the Chilean peso and 8.0% in the Japanese yen. Assume that the international parity conditions hold. Required returns for projects in this risk class are: • For CLP: 19.0% in Chilean peso; and • For JPY: 21.245% in Japanese yen The spot exchange rate is SCLPPY CLP 5.0984/JPY. The project country's government has Japanese yen-denominated bonds outstanding that currently yield 6.09% per annum. Your firm pays a marginal corporate tax rate of 25% on its Japanese yen profits, which is the same marginal tax rate that your firm pays on its parent company profits in Chilean peso. O a. The NPV from the project's perspective is -CLP 117.34 million Ob. The NPV from the project's perspective is -CLP 114.89 million O c. The NPV from the project's perspective is -CLP 112.28 million O d. The NPV from the project's perspective is -CLP 111.01 million O e. The NPV from the project's perspective is -CLP 113.86 million Suppose that all of the Japanese yen cash flows generated by the project must be loaned to the country's government at an interest rate of 0% per annum until one year after the completion of the project (i.e. until t=4). Factoring in the opportunity cost of the blocked funds, what is the NPV of Funky Turtle's project? You work for Funky Turtle Limited, which is a firm whose home currency is the Chilean peso (CLP) and that is considering a foreign investment. The investment yields expected after-tax Japanese yen (JPY) cash flows (in millions) as follows: Year 0 -JPY800 Year 1 JPY425 Year 2 JPY425 Year 3 JPY425 Expected inflation is 6.0% in the Chilean peso and 8.0% in the Japanese yen. Assume that the international parity conditions hold. Required returns for projects in this risk class are: • For CLP: 19.0% in Chilean peso; and • For JPY: 21.245% in Japanese yen The spot exchange rate is SCLPPY CLP 5.0984/JPY. The project country's government has Japanese yen-denominated bonds outstanding that currently yield 6.09% per annum. Your firm pays a marginal corporate tax rate of 25% on its Japanese yen profits, which is the same marginal tax rate that your firm pays on its parent company profits in Chilean peso. O a. The NPV from the project's perspective is -CLP 117.34 million Ob. The NPV from the project's perspective is -CLP 114.89 million O c. The NPV from the project's perspective is -CLP 112.28 million O d. The NPV from the project's perspective is -CLP 111.01 million O e. The NPV from the project's perspective is -CLP 113.86 million Suppose that all of the Japanese yen cash flows generated by the project must be loaned to the country's government at an interest rate of 0% per annum until one year after the completion of the project (i.e. until t=4). Factoring in the opportunity cost of the blocked funds, what is the NPV of Funky Turtle's project?

Answer rating: 100% (QA)

Correct answer is DThe NPV is CLP11101 MILLION NPV is calcul... View the full answer