Question: Sigma Company, a US MNC is contemplating marking a foreign investment in Thailand. The initial cost of the project is THB100,000. The annual cash flows

Sigma Company, a US MNC is contemplating marking a foreign investment in Thailand. The initial cost of the project is THB100,000. The annual cash flows over the two-year economic life of the project in THB are estimated as 70,000 and 80,000. The parent firms cost of capital in dollar is 8%. Long-run inflation is forecasted to be 3% p.a. in the US and 5% p.a. in Thailand. The current spot rate is THB/USD = 25.75. What is the THB equivalent cost of capital according to Fisher effect?

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