You want to invest in a project in Australia. The project has an initial cost of A$2.3 million and is expected to produce cash inflows of A$950,000 a year for 3 years. The project will be worthless after the first 3 years. The expected inflation rate in Australia is 5 % while it is only 2 % in Canada. The applicable interest rate in Australia is 9 %. The current spot rate is A$1 = C$.86. What is the net present value of this project in Australian dollars using the foreign currency approach?

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The Answer of You want to invest in a project in Australia. The project has an initial cost of A$2.3 million and is expected to produce cash inflows of A$950,000 a year for 3 years. The project will be worthless after the first 3 years. The expected inflation rate in Australia is 5 % while it is only 2 % in Canada. The applicable interest rate in Australia is 9 %. The current spot rate is A$1 = C$.86. What is the net present value of this project in Australian dollars using the foreign currency approach?

You Want to Invest in a Project in Australia