Please show formulas and workings Moon Rhee Auto Supply, a Korean supplier of parts to Kia...
Please show formulas and workings
Moon Rhee Auto Supply, a Korean supplier of parts to Kia Motors, is evaluating an opportunity to set up a plant in Alabama, where Kia Motors has an auto assembly plant for its SUVs.
The cost of this plant will be $13.5 million.
The current spot rate is 946.53 Korean won per U.S. dollar.
The company uses a discount rate of 9 percent for projects in the United States. The company is expected to use this plant for the next five years and is expecting to generate the following cash flows.
Years 1 - 2 - 3 - 4 - 5
Cash flows (US millions) 2.3 - 4.2 - 3.6 - 5.8 - 7.6
Expected exchange rate (Korean won/$) 932.031 - 923.632 - 956.155 - 952.221 - 943.670
Required What is the NPV of this project?
Should Moon Rhee Auto Supply take on this project?
Homework Answers
| years | cash inflows (millions) | present value factors | discounted cash flows |
| 1 | 2.3 | 0.917 | 2.10 |
| 2 | 4.2 | 0.841 | 3.53 |
| 3 | 3.6 | 0.772 | 2.77 |
| 4 | 5.8 | 0.708 | 4.10 |
| 5 | 7.6 | 0.649 | 4.93 |
Totat discounted CashFlows 17.43
Intial cost (13.5)
Net Present Value 3.93
this is good project which will provide good cash inflows.
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Please show formulas and workings
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