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QUESTION 4 (a) Lite Sdn. Bhd. plans to expand their operation in foreign countries. Currently, the company considers to invest in a riskless project in Canada. The project requires an initial cost of CAD$2.95 million and is expected to have cash inflows of CAD$1.1 million a year for the life of the project. The duration of the project is three years and it will be worthless after three years. While the expected inflation rate in Canada is 3.5%, it is 3.1% in Malaysia. A risk-free security is paying 3.9 percent in Malaysia. The current spot rate is CAD$0.316. The company also involves in off-balance sheet hedging activities. Last month, Lite Sdn. Bhd. purchased eight (8) March crude oil future contracts at a quoted price of 48.33. These contracts are based on 800 barrels per contract and quoted in RM per barrel. Assume, the actual price per barrel is RM54.22 in March. As a strategic movement, Lite Sdn. Bhd. acquired Ether Sdn. Bhd. for a worth of RM68,000 of Lite Sdn. Bhd.'s stock. The incremental value of the acquisition is RM5,100. Lite Sdn. Bhd. has 10,200 shares of stock outstanding at a price of RM30 a share. Ether Sdn. Bhd. has 2,500 shares of stock outstanding at a price of RM19 a share. (1) If the international Fisher effect applies, what is the net present value of this project in Canadian dollar? (7 marks) (ii) After involved in hedging activities, how much did the company gain or lose? (7 marks) (iii) What is the actual cost of the acquisition using company stock? (7 marks) (iv) Differentiate between cash and stock acquisition. (4 marks) (Total: 25 Marks)

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