Question 1 (a)

Inflation- US 3.00%
Inflation-MP 4.50%
Cost of Capital - US 6.50%
Cost of Capital - MP 8.05097% 8.000%

Year CF (MP)
0 (28,000)
1 5,000
2 6,000
3 8,000
4 9,000
5 9,800

NPV (MP) 1365.10 1,409.30

spot rate (MP/USD) 19.450 19.450
NPV (USD) 70.18 72.457814

Question 1 (b)

Inflation- US 3.00%
Inflation-MP 4.50%
Current Spot Rate

Year S(T+1) CF (MP) CF(USD)

0 19.45 (28,000) (1,439.59)
1 21.20 5,000 235.85
2 22.15 6,000 270.88
3 23.63 8,000 338.55
4 24.32 9,000 370.07
5 25.19 9,800 389.04

Cost of Capital - US 6.50%

NPV (USD) ($127.42)

Question 5 (d)

Year Ft CF (MP) CF(USD)

0 19.45 (28,000) (1,439.59)
1 21.20 5,000 235.85
2 22.15 6,000 270.88
 3 23.63 8,000 338.55
4 24.32 9,000 370.07
5 25.19 9,800 389.04

Cost of Capital - US 6.50%

NPV (USD) ($127.42)