Page 50 - Demo

%u062c%u0645%u064a%u0639 %u0627%u0644%u062d%u0642%u0648%u0642 %u0645%u062d%u0641%u0648%u0638%u0629 %u0640 %u0627%u0625%u0644%u0639%u062a%u062f%u0627%u0621 %u0639%u0649%u0644 %u062d%u0642 %u0627%u0645%u0644%u0624%u0644%u0641 50 %u0628%u0627%u0644%u0646%u0633%u062e %u0623%u0648 %u0627%u0644%u0637%u0628%u0627%u0639%u0629 %u064a%u0639%u0631%u0636 %u0641%u0627%u0639%u0644%u0647 %u0644%u0644%u0645%u0633%u0627%u0626%u0644%u0629 %u0627%u0644%u0642%u0627%u0646%u0648%u0646%u064a%u0629is %uf070$= 8% and PPP is expected to hold between the two countries. Calculate theNPV for this project.5- Using the information in the previous question, what is the foreign required rate of return for Ringgit?Answer:1- NPV calculation:0 1 2 3Cash Follows -20,000,000 RIN 8,000,000 RIN 9.000.000 RIN 10,000,000 RINSalvage value +2,000,000Remitted funds to theparent in Rin8,000,000 RIN 9.000.000 RIN 12,000,000 RINThe exchange rate 0.23 $/RIN 0.23 $/RIN 0.23 $/RIN 0.23 $/RINRemitted fundsto the parent and initialinvestment of $-4.600,000$ 1,840.000$ 2,070,000$ 2,760,000$NPV = %u2212%ud835%udfd2%ud835%udfd2, %ud835%udfd4%ud835%udfd4%ud835%udfce%ud835%udfce%ud835%udfce%ud835%udfce, %ud835%udfce%ud835%udfce%ud835%udfce%ud835%udfce%ud835%udfce%ud835%udfce + %ud835%udfcf%ud835%udfcf,%ud835%udfd6%ud835%udfd6%ud835%udfd2%ud835%udfd2%ud835%udfce%ud835%udfce.%ud835%udfce%ud835%udfce%ud835%udfce%ud835%udfce%ud835%udfce%ud835%udfce$+ %ud835%udfd0%ud835%udfd0,%ud835%udfce%ud835%udfce%ud835%udfd5%ud835%udfd5%ud835%udfce%ud835%udfce,%ud835%udfce%ud835%udfce%ud835%udfce%ud835%udfce%ud835%udfce%ud835%udfce$+ %ud835%udfd0%ud835%udfd0,%ud835%udfd5%ud835%udfd5%ud835%udfd4%ud835%udfd4%ud835%udfce%ud835%udfce,%ud835%udfce%ud835%udfce%ud835%udfce%ud835%udfce%ud835%udfce%ud835%udfce$ = %ud835%udfd6%ud835%udfd6%ud835%udfd3%ud835%udfd3%ud835%udfd5%ud835%udfd5, %ud835%udfce%ud835%udfce%ud835%udfd7%ud835%udfd7%ud835%udfd7%ud835%udfd7 $ (%ud835%udfcf%ud835%udfcf+%ud835%udfce%ud835%udfce.%ud835%udfcf%ud835%udfcf%ud835%udfce%ud835%udfce) (%ud835%udfcf%ud835%udfcf+%ud835%udfce%ud835%udfce.%ud835%udfcf%ud835%udfcf%ud835%udfce%ud835%udfce)%ud835%udfd0%ud835%udfd0 (%ud835%udfcf%ud835%udfcf+%ud835%udfce%ud835%udfce.%ud835%udfcf%ud835%udfcf%ud835%udfce%ud835%udfce)%ud835%udfd1%ud835%udfd12- Blocked funds0 1 2 3Cash Follows -20,000,000 RIN 8,000,000 RIN 9.000.000 RIN 10,000,000 RINSalvage value +2,000,000 RIN+8,000,000 RIN+9,000,000 RINRemitted funds to theparent in Rin29,000,000 RINThe exchange rate 0.23 $/RIN 0.23 $/RINRemitted funds to theparent and initial investment in $-4.600,000$ 6,670,000$NPV = %u2212%ud835%udfd2%ud835%udfd2, %ud835%udfd4%ud835%udfd4%ud835%udfce%ud835%udfce%ud835%udfce%ud835%udfce, %ud835%udfce%ud835%udfce%ud835%udfce%ud835%udfce%ud835%udfce%ud835%udfce + %ud835%udfd4%ud835%udfd4,%ud835%udfd4%ud835%udfd4%ud835%udfd5%ud835%udfd5%ud835%udfce%ud835%udfce,%ud835%udfce%ud835%udfce%ud835%udfce%ud835%udfce%ud835%udfce%ud835%udfce$ = %ud835%udfd2%ud835%udfd2%ud835%udfcf%ud835%udfcf%ud835%udfcf%ud835%udfcf,%ud835%udfd0%ud835%udfd0%ud835%udfd4%ud835%udfd4%ud835%udfd7%ud835%udfd7$(%ud835%udfcf%ud835%udfcf+%ud835%udfce%ud835%udfce.%ud835%udfcf%ud835%udfcf%ud835%udfce%ud835%udfce)%ud835%udfd1%ud835%udfd13- Blocked funds and reinvestment:%uf06c The future value of reinvested cash flows in year 3:FV (CF1) in year 3= 8,000,000 %u00d7 (1 + .05)2= 8,820,000FV (CF2) in year 3= 9,000,000 %u00d7 (1 + .05)1= 9,450,000