Question: Xomo, a U. S.- based firm, is proposing a project in a developing country. The project's after- tax cash flows in the foreign currency are

Xomo, a U. S.- based firm, is proposing a project in a developing country. The project's after- tax cash flows in the foreign currency are as follows:

YearAfter- Tax Cash Flows

1250

2350

3450

The initial investment in the project is USD 1,100. The spot rate for the foreign currency is USD 1.60. The appropriate discount rate for foreign currency cash flows is 18 percent. Assume that the foreign government forces the firm to place all cash flows in a bank account earning 3 percent until the end of the project. What is the NPV of blocked funds?

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