Calculate the npv and irr of investment

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Assume a Malaysian MNC is considering a 'greenfield' investment in a foreign country. Your group can choose any suitable foreign country for this project. The project is expected to cost MYR100 million and would generate local currency cash flows in the country it is operating equivalent to 20% of the project cost in the first year. The cash flows are expected to increase 20% annually over the next four years. At the end of Year 5, the project could be sold for 20% of initial cost. Additionally, the project is expected to have negative impact on the MNC's domestic cash flows due to lost exports from a competing older product line. The negative impact is estimated to be MYR2 million per annum until the project is sold. Any remittances to the outside world, including terminal sale proceeds from the project, would attract a 20% withholding tax. For this type of investment, your company would expect a minimum return of 12% per annum.

Calculate the NPV and IRR of this investment from the project's viewpoint and the parent's viewpoint? Should the company invest in this project? Why or why not? What would be the impact on your answer if there is no withholding tax?

Reference no: EM132753472

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