Zion, Inc., a US based pharmaceutical is considering a project ina foreign country. The initial investment is USD 200MM and the spot rate for the foreign currency is USD 0.75 i.e. the local/foreign currency investment required will be thus higher. The firm's cost of capital is 10%,
The project's after-tax cash flow in local/foreign currency are estimated as follows:
Year 1= 300MM; Year 2 =500MM; Year 3 = 800MM and Year 4 = 400MM
 
Assume the foreign government forces the firm to place all cash flow in a bank account earning 2 percent interest until the end of the project. What is the NPV of the project to the the subsidiary?

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