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What is the project npv in brl

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Question: Eureka Company, a U.S. MNC, is contemplating making a foreign capital expenditure in Brazil. The initial cost of the project is Brazilian Real (BRL) 20,000. The annual cash flows over the five-year economic life of the project in BRL are estimated to be 6,000, 7,000, 8,000, 10500, and 12,000. The parent firm's cost of capital in dollars is 7.5 percent. Long-term inflation is forecasted to be 2.2 percent per annum in the U.S. and 6.4 percent in Brazil. The current spot foreign exchange rate is BRL/USD = 5.31. Compute BRL equivalent of the firm's cost of capital according to the Fisher Effect. Based on that, what is the project NPV in BRL and should Eureka proceed with the project?

Reference no: EM132758531

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