What is the npv from the subsidiary perspective

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A Canadian MNC is considering a mining project in Brazil with the following cash flows:

Year     Cash Flow (BRL million)

0              -150

1                40

2                55

3                70

4                80

The subsidiary- level cost of capital for this project is 18 percent. The subsidiary obtained this rate by conducting a benchmark study of cost of capital for Brazilian firms for similar projects. The firm’s CFO notes that this cost is artificially high due to parity violation. In particular, the CFO notes that four- year interest rates in Canadian dollar- (CAD) and BRL- denominated risk- free debt are 3 percent and 8 percent, respectively, and that the company’s CAD- denominated WACC is 10 percent. What is the NPV from the subsidiary’s perspective?

Reference no: EM132061256

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