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3. What discount rate would you use to discount the Brazilian Real cash flows from the project? Does this adequately capture

3. Note the value of the cheap financing should be added to the Br R value that you calculated above. For this calculation yoBuilding and site preparation Employee training/development Production assembly equipment R$10 billion R$6 billion R$20 billiinflation to accommodate for the changes in market prices. The inflation in Brazil over this period is estimated to be eightExhibit 2 PROJECT FINANCING Value of Loan (in R$) Value of Loan (in ) 24.000 864,000 2001 Annual Loan payments (interest and

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3. I would use Brazilian risk free rate which is available on Brazilian Government bonds to discount the cash flows which is available in Brazilian currency

A firm which is highly conservative can use Brazilian risk free rate which are adjusted with the market rate, so that high rate of discounting could be used in order to ascertainment of cash flows from Brazilian currency.

So it is always based upon the nature and conservative approach of different firm in order to recognise cash flow from other country

This can partially control the risk which is arising from investment into Brazil, this will not completely eliminate the risk.

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