88. Americo Corp is considering construction a manufacturing plant in Turkey. The initial invest will cost...
88. Americo Corp is considering construction a manufacturing plant in Turkey. The initial invest will cost 15 million Turkish Lira (L). The company plans to keep the plant open for 3 years during which cash flows from operations will be 5million, 5million and 4 million Liras respectively at end each of the three years. At end of the third year Americo plans to sell the plant for 10 million liras. Americo’s required rate of return is 15% and the current exchange rate L/$ is 5.75. If the lira is expected to appreciate by 5% per year determine the NPV for this project. Should Americo build this plant?
Homework Answers
Attaching the cash flows and formulas used :-
NPV of this Project = USD 0.763mn
Since, this Project is NPV positive, Americo should build this plant
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