Help! Please show me the steps! Apple Inc is planning to set up a project in Jap

Question

Help! Please show me the steps! Apple Inc is planning to set up a project in Japan with an expected life of 5 years. The project is expected to generate a cash flows of Yen 2 million, 2.5 million, 3 million, 3.25 million and 3.5 million over the next five years. The project requires an initial investment of Yen 8 million. The current spot rate of $ and Yen is $1=Yen 105. $ is expected to depreciate by 1.25% per year over the next 5 years against Yen. What is the NPV of this project in $ terms at a cost of capital of 8%?

Explanation / Answer

Apple Inc. Amounts in $ Rate of Dollar against Yen, yearwise Year Dollar Yen Cash (Outflow)/Inflow in Yen Cash (Outflow)/Inflow in USD 0 1 105 -8000000 -76190.476 1 1 106.3125 2000000 18812.463 Value goes up by 1.25% compared to Yen in the previous year, which means that Dollar depreciates 2 1 107.6414 2500000 23225.263 3 1 108.9869 3000000 27526.238 4 1 110.3493 3250000 29451.942 5 1 111.7286 3500000 31325.902 Based on the information given, and a Cost of Capital of 8%, the Net Present Value of the project of Apple Inc works out to $ 24,036.62

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.