What is npv of blocked funds

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Reference no: EM132061251

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

Year                                                   After- Tax Cash Flows

1                                                         200

2                                                         250

3                                                         300

4                                                         250

5                                                         200

The initial investment in the project is USD 300. The spot rate for the foreign currency is USD 0.86. The appropriate discount rate for foreign currency cash flows is 13 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?

Reference no: EM132061251

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