Assignment:
Q: A Canadian investor Is evaluating a South Africa based project. The total project cost estimate, in Rand, is ZAR 27 million. Cash flows from the project will be ZAR7.5 million p.a. The project will last five years. The spot exchange rate is ZAR 0.98/5. Follow the instructions provided to obtain the dollar weighted average cost of capital, the dollar (Eurodollar) interest rate and the rand interest rate (Eurorand).
(a) Determine the expected exchange rates over the next four years.
(b) from your exchange rates in (a),convert project and cash flows into dollar flows and determine the NPV