particulars year 0 year 1

expected receipt 720000

discount factor @ 12% 0.8928571428571
discounted value 720000.89285714
exchange rate 0.95472
total in usd 720001.84757714

Decrease in exchange rate

particulars year 0 year 1
expected receipt 720000
discount factor @ 12% 0.8928571428571
discounted value 720000.89285714
exchange rate with euro depreciation 0.95472
total in usd 720001.84757714

Q2)
A 10 million US dollar is invested in thailand for a period of 5 years it is financed by 50% debt and 50% equity.Normally the cos
The project is expected to gen 3M USD as a operating cash flow every year.
for a perid of 5 years and the marginal tax rate is 40%.
Cal the adjusted NPV for the above project assumimg an all equity discount rate of 14.6%.
Sol.
cash flow stream 1
operating cash flow = 3 M USD at a discount rate of 14.6%

cash flow stream 2

savings in interest

normal debt rate 12%

rate paid for borrowing from world bank 10%
savings 2%

cash flow stream 3

tax benefit on account of payment of interest

debt capital borrowed from world bank 5 M USD

rate of interest 10%

annual interst 500000

tax benefit annual interest * tax rate

 200000

cal of adjusted NPV

type of cash flow cash flow Time

Operating cash flow 3000000 5 years
savings 100000 5 years
tax benefit 200000 5 years
pv of total cash flow
less:initial investment 1000000
adjusted NPV

Q3)
Indian pharma ltd is evaluating an overseas investment proposal.Indian pharma is an exporter of pharmaceutical products is c
the current spot exchange rate is
the risk free rate of interest in India is !!% in US it is 6%.
Indian pharma requires a rupee return of 15% on the above project.
cal npv under home currency approach as well as foreign currency approach.
the inflation can be cal using internatinal fischers effect method

years CF in million USD

1 30
2 40
3 50
4 60

78.54 78.537735849057
82.24 82.242346030616
86.12 86.121701975456
90.18 90.184046408261
 year 2 year 3 total
792000 871200
0.797194 0.7117802478134
792000.8 871200.711780248
0.992909 1.032625152
792001.8 871201.7444054

year 2 year 3 total

792000 871200
0.797194 0.7117802478134
792000.8 871200.711780248
0.992909 1.032625152
792001.8 871201.7444054 167331.75

and 50% equity.Normally the cost of debt would be 12% of project of this type.

EBDIT XXXX
less dep XXX
EBIT XXXX
USD Less int XXX
EBT XXXX
interest * tax rate Less tax XXX
EAT XXXX
 Dis factor annulised did fact discounted cash flow
14.60% ₹ 10,152,446.93 3.38414897608126 10152447 1 0.8726 0.892857
12% ₹ 360,477.62 3.604776202345 360477.6 2 0.761431 0.797194
12% 3.604776202345 3 0.664425 0.71178
4 0.579778 0.635518
5 0.505914 0.567427
total 3.384149 3.604776

r of pharmaceutical products is considering to build a plant in US.the project will entile an initial outlay of 100 M USD and is epected to gib
100 M USD and is epected to gibe the following cash flows over it slife of 4 years.