24 Jul WHAT IS THE EXPECTED FORWARD EXCHANGE RATE 1 YEAR FROM NOW?
The South Korean multinational manufacturing firm Nam Sung Industries is debating whether to inves Show more The South Korean multinational manufacturing firm Nam Sung Industries is debating whether to invest in a 2-year project in the United States. The projects expected dollar cash flows consist of an initial investment of $1 million with cash inflows of $700000 in Year 1 and $600000 in Year 2. The risk-adjusted cost of capital for this project is 13%. The current exchange rate is 1062 won per U.S. dollar. Risk-free interest rates in the United States and S. Korea are: 1-Year 2-Year United States 4% 6.75% S. Korea 3% 5.75% a. If this project were instead undertaken by a similar U.S.-based company with the same risk-adjusted cost of capital what would be the net present value generated by this project? Round your answer to the nearest cent. The correct answer is: $89357.04 What would be the rate of return generated by this project? Round your answer to two decimal places. The correct answer is: 20.00% b. What is the expected forward exchange rate 1 year from now? Round your answer to two decimal places. The correct answer is: 1051.79 won per US $ What is the expected forward exchange rate 2 years from now? Round your answer to two decimal places. The correct answer is: 1052.54 won per US $ ***C. If Nam Sung undertakes the project what is the net present value and rate of return of the project for Solitaire? Round your answers to two decimal places. NPV in wons?? IRR?? I cannot figure out part C. I would greatly appreciate if you could explain how to arrive at the correct answer. Show less
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