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What is the net present value of this project

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Question - Bap Company has a unique opportunity to invest in a two year project in Australia. The project is expected to generate A $ 600,000 (A $) in the first year and A $ 2,300,000 in the second. Bap is expected to invest immediately $ 1,300,000 (USD) in the project. Bap has determined that the cost of capital for similar projects is 11%. What is the net present value of this project if the Australian dollar spot rate for both years is forecast at $ 0.55 and $ 0.60, respectively?

An external consultant has just completed a report indicating that there is a 30% risk that the government will decide to levy a tax of A $ 150,000 per Australian company to fund forest firefighting in year two, what then would be the net present value of the Australian project?

Reference no: EM133172627

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