Salt Inc. just constructed a manufacturing plant in Ghana. The construction cost 9 billion Ghanaian cedi. Salt intends to leave the plant open for 3 years. During the 3 years of operation, cedi cash flows are expected to be 3 billion cedi, 3 billion cedi, and 2 billion cedi, respectively. Operating cash flows will begin 1 year from today and are remitted to the parent at the end of each year. At the end of the third year, Salt expects to sell the plant for 5 billion cedi. Salt has a required rate of return of 17%. It currently takes 8,700 cedi to buy one U.S. dollar, and the cedi is expected to depreciate by 5% per year.
A. Determine the NPV for this project. Should Salt build the plant?
B. How would your answer change if the value of the cedi was expected to remain unchanged from its current value of 8,700 cedi per U.S. dollar over the course of the 3 years? Should Salt construct the plant then?