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Subject international finance A project in New Zealand requires an initial investment of 3 billion...

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Accounting

Subject international finance

A project in New Zealand requires an initial investment of 3 billion New Zealand dollar. The project is expected to generate annual cash flow of 1.5 billion, 2 billion, 3 billion, 4.5 billion and 5.6 billion in Year 1, 2, 3, 4 and 5 respectively. The project has no salvage value. The current value of the New Zealand Dollar is 0.35 per Ringgit Malaysia and assume the value of New Zealand Dollar is remain constant at 5 years.

The other project in Australia and the initial investment is 2 billion and the cash flow expected to generate are Australia Dollar 1 billion, 1.5 billion, 2 billion, 3 billion and 3.8 billion in Year 1, 2, 3, 4 and 5 respectively. The project has no salvage value. The current value of the Australia is 0.33 per Ringgit Malaysia and assume the value of New Zealand Dollar is remain constant at 5 years.

Require

  1. What is the NPV of this project if the required rate for both projects are 12%?

b) Analyze both project

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