A project in New Zealand requires an initial investment of 3 billion New Zealand dollar

A project in New Zealand requires an initial investment of 3 billion New Zealand dollar. The project is expected to generate annual cash flow of 1.5 billion, 2 billion, 3 billion, 4.5 billion and 5.6 billion in Year 1, 2, 3, 4 and 5 respectively. The project has no salvage value. The current value of the New Zealand Dollar is 0.35 per Ringgit Malaysia and assume the value of New Zealand Dollar is remain constant at 5 years.

The other project in Australia and the initial investment is 2 billion and the cash flow expected to generate are Australia Dollar 1 billion, 1.5 billion, 2 billion, 3 billion and 3.8 billion in Year 1, 2, 3, 4 and 5 respectively. The project has no salvage value. The current value of the Australia is 0.33 per Ringgit Malaysia and assume the value of New Zealand Dollar is remain constant at 5 years. Required:

a. What is the NPV of this project if the required rate for both projects are 12%? (6 marks) (CLO3:PLO6:C5)

b. Discuss the factors for both countries when construct the capital budgeting? (10 marks) (CLO3:PLO6:C5

C. If the company borrow money from the host country due to the expansion, which option is the best either the parent remits the funds and pay to the bank in host

country or the subsidiary in the host country to pay the loan? Why?

D) Analyse both projects