-Refer to Exhibit T13.1. Suppose there is a 10% chance that the host government will seize the assets of the project in year 3. If the assets are not seized, you expect to receive the cash flows as shown. If the assets are seized, you expect to receive repatriated funds in year 1 and year 2 only. Assuming international parity conditions hold, S₀^£/€ = £2/€, i^€ = 5%, and i^£ = 7%, what is the NPV in pounds?

Question

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The Answer of -Refer to Exhibit T13.1. Suppose there is a 10% chance that the host government will seize the assets of the project in year 3. If the assets are not seized, you expect to receive the cash flows as shown. If the assets are seized, you expect to receive repatriated funds in year 1 and year 2 only. Assuming international parity conditions hold, S₀^£/€ = £2/€, i^€ = 5%, and i^£ = 7%, what is the NPV in pounds?