oo-fus Inc. is an Australian dog food producer specializing in kangaroo-based dog food. It is looking to set up operations in New Zealand. The financial expert is has hired expects the following cash flows (in New Zealand Dollars): Yr0 Yr1 Yr2 Yr3 Yr4 -3.5 16.3 16.1 17.4 11.5 The corporate tax rate is 30% in Australia and in New Zealand. The risk-free rate is 2.6% in Australia and is 2.3% in New Zealand. Inflation is 3.4% in Australia and is 2.6% in New Zealand. The current spot NZD/AUD exchange rate in 0.62 NZD/AUD. The required rate of return for this type of project is 3.5% in Australia and 4.9% in New Zealand
Roo-fus Inc. is an Australian dog food producer specializing in kangaroo-based dog food. It is looking to set up operations in New Zealand. The financial expert is has hired expects the following cash flows (in New Zealand Dollars):
| Yr0 | Yr1 | Yr2 | Yr3 | Yr4 |
| -3.5 | 16.3 | 16.1 | 17.4 | 11.5 |
The corporate tax rate is 30% in Australia and in New Zealand. The risk-free rate is 2.6% in Australia and is 2.3% in New Zealand. Inflation is 3.4% in Australia and is 2.6% in New Zealand.
The current spot NZD/AUD exchange rate in 0.62 NZD/AUD. The required
Suppose that 42% of the funds are blocked in New Zealand where they earn no return, until one year after the project finishes.
If PPP holds, what is the
a.
51.2406
b.
24.3896
c.
81.0104
d.
23.7699
e.
38.7798
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