RoadsRus Contracting Corp. is considering a road-construction project in Nepal. The following data has been...
80.2K
Verified Solution
Link Copied!
Question
Finance
RoadsRus Contracting Corp. is considering a road-construction project in Nepal. The following data has been collected by the corporation's project management team:
Cost of project (1 time cost in April 2020): Rs 50,000.
The project will be financed with Rs25,000 retained earnings, and Rs25,000 debt issued in the US. 6. Project's Cost of Equity 15%; Projects Cost of Debt 12%.
Operating Cash flow (revenues minus operating costs) (upon completion in April 2021):Rs 80,000.
Lost sales (export of Tar), resulting in a loss of operating cash flows: Rs 1,000.
Concessionary Loan at 10% (typical lending rate 20%): Rs 10,000. Loan is to be repaid in April 2021.
Tax rate Nepal: 45% Tax rate in the US: 21%.
Reactivated funds Rs 10,000. Funds will be released only if RoadsRus accepts the project.
Expected savings from transfer pricing: $0.
Spot rate S($/Rs) April 2020: 0.02.
1 year LIBOR(US$)=5%, 1 Year LIBOR(NepalRupee)=14%.
Depreciation allowance on the project: Rs 5,000.
Q. Employ the APV method to indicate whether the project management team should accept the project.
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
