Syntax Tar Sand Inc., a Canadian company, has an opportunity to invest in Peru. The project...

 

Transcribed Image Text:

Syntax Tar Sand Inc., a Canadian company, has an opportunity to invest in Peru. The project requires an immediate cash outlay of $3 million and is expected to provide after-tax cash flows of $800,000 in year 1, $1,000,000 in year 2, $1,200,000 in year 3, and $1,600,000 in year 4. The appropriate discount rate for a similar project in Canada is 12%. The risks of implementing such a project in Peru will require a risk premium of 4%. What will be the impact on the shareholder value of Syntax if the firm undertakes this project in Peru? Syntax Tar Sand Inc., a Canadian company, has an opportunity to invest in Peru. The project requires an immediate cash outlay of $3 million and is expected to provide after-tax cash flows of $800,000 in year 1, $1,000,000 in year 2, $1,200,000 in year 3, and $1,600,000 in year 4. The appropriate discount rate for a similar project in Canada is 12%. The risks of implementing such a project in Peru will require a risk premium of 4%. What will be the impact on the shareholder value of Syntax if the firm undertakes this project in Peru?

Answer rating: 100% (QA)

Discount rate Discount rate for Project in ... View the full answer