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QUESTIONS 1-3. Your firm wants to lease 1,000 acres in the Australian outback for one...

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QUESTIONS 1-3. Your firm wants to lease 1,000 acres in the Australian outback for one year. The lease payment of AUD 100,000 will occur upfront. You'l incur no other expenses. You'll simply let wild wallabies roam free and graze on the land. At the end of one year, you expect to capture 100 free-range wallabies, which you'll sell. Financial Datal Appropriate USD discount rate Spot exchange rate: 5% 0.75 USD per AUD One-Year Forecasts Price of a wallaby in one year Exchange rate in one year AUD 2,000 0.70 USD per AUD QUESTION 3. Australia becomes a high inflation country. You don't believe that the Law of One Price will hold, but you do believe that Relative PPP will hold. You observe the following variables Appropriate USD discount rate Spot exchange rate Current Price of a Wallaby Expected AUD inflation Expected USD infiation 5% 0.75 USD per AUD AUD 1,600 25% 5% a. Use this information to fill in the blanks below. Today In One Year Project NPV (in USD terms) AUD Cash Flows USD Cash Flows b. Fill in the blanks below, assuming-that Australian inflation is 50% instead of 25%. What is the impact of Australian inflation on the project's NPV? Today In One Year Project NPV (in USD terms) AUD Cash Flows USD Cash Flows

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