The spot exchange rate for the Thai bhat is 33.135 bhat to the Australian dollar.The 1 year forward rate is 34.175.Ramo Corp.has undertaken a capital project in Bangkok that is expected to produce a cash flow of 17,087,500 bhat at the end of the first year.The company will discount cash flows at a rate of 14%.What is the present value of the first year cash flow in AUS$?

Question

Quizplus · Accepted Answer

To find the present value in AUD, we need to convert the cash flow in bhat to AUD. 
PV = (17,087,500 Thai bhat / 34.175 Thai bhat per AUD) = 499,997.08 AUD
Then, we can use the present value formula:
PV = CF / (1+r)^t, where CF is the cash flow, r is the discount rate, and t is the time period.
PV = 499,997.08 / (1+0.14)^1 = 438,596.24 AUD
Rounded to the nearest dollar, the answer is C) $438,596.

The Spot Exchange Rate for the Thai Bhat Is 33