What is the npv in dollars

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Delta Company, a U.S. MNC, is contemplating making a foreign capital expenditure in South Africa. The initial cost of the project is ZAR103. The annual cash flows over the five year economic life of the project in ZAR are estimated to be 29, 34, 39, 46, and 53. The parent firm's cost of capital in dollars is 7.7 percent. Long-run inflation is forecasted to be 1.9 percent per annum in the U.S. and 9 percent in South Africa. The current spot foreign exchange rate is USD/ZAR = 14.35 (Rand/$).

Problem 1: What is the NPV in dollars if the actual pattern of USD/ZAR exchange rates is: S(0) = 14.35, S(1) = 14.57, S(2) = 14.8, S(3) = 15.04, S(4) = 14.51, and S(5) = 15.84?

Reference no: EM132949869

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