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8. Vande The following information has been gathered to assess this project: The initial investment required is SGD 10 million. The current spot rate is .73 USD/SGD The project will be terminated at the end of Year 2, when the subsidiary will be sold. .The price, demand, and variable cost of the product in the Singapore are as follows: lay Corporation presently has an existing business in Singapore but is considering an additional plant there. Year Price Demand Variable cost 1 SGD 25 550,000 SGD 10 2 SGD 20 600,000 SGD 8 .The exchange rate is forecasted to be .71 USD/SGD at the end of Year 1, and.70 USD/SGD at the end of year 2. The Singapore government will impose an income tax of 20% on income. In addition, the US. government will impose a tax of 10% on earnings remitted by the subsidiary (ignore tax credits). Singapore imposes a 10% withholding tax on all remittances to foreign countries. All cash flows received by the subsidiary are sent to the parent at the end of each year. The annual depreciation expense is 15% of initial outlay. In two years the subsidiary is to be sold. Vandelay expects to receive SGD 1.5 million. This amount will be taxed at the usual withholding rate in Singapore. (But, it will not be taxed in the US. at the 10% rate.) . Vandelay requires a 12% rte of return on this project. (i) Calculate the NPV from the perspective of the subsidiary. (ii) Calculate the NPV from the perspective of the parent. (iii) Should Vandelay accept this project

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