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What are the NPV and IRR of the Norwegian project

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Question - UF, Inc. is considering the establishment of a subsidiary in Norway. The initial investment required by the parent is NOK40 million. If the project is undertaken, UF would terminate the project after four years. UF's cost of capital is 13%, and the project is of the same risk as UF's existing projects. All net cash flows generated from the project will be remitted to the parent at the end of each year. Listed separately below are the estimated cash inflows and outflows the Norwegian subsidiary will generate over the project's lifetime in millions of Norwegian kroner (NOK), and UF's forecast of future exchange rates. The current exchange rate of the Norwegian kroner is $0.135/NOK.

Required - What are the NPV (in $) and IRR of the Norwegian project?

Year1 ; inflow NOK18; outflow NOK8;FX rate $0.13 /NOK

Year2 ; inflow NOK25; outflow NOK10; FX rate $0.14/NOK

Year3 ; inflow NOK29; outflow NOK12; FX rate $0.12/NOK

Year4 ; inflow NOK40; outflow NOK15; FX rate $0.15/NOK

Reference no: EM132619824

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