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amount is converted into dollars and sent through remittance it would worth less and specially in that
case when the amount is quite large is sent to parent.
Its not a good case if the project is divested because it will not cover its initial expense, if
Leigh is offered an offer that is above the estimated present value of the project then he should divest the
project.
If the cash flow is less, than the risk may turn down. The risk would increase in such case if
more organizations start doing business in Germany; the situation will become more extreme due to
competition. If the political environment starts to support the organizations for business it would
generate more risk.
Year
Investment done
Salvage Value
Total Cash flow
2
5
Rate
8,700
CF to parent
$1,034,483
PV of parent CF
$433,978.15
NPV
$91,339.03
9,135
10,071
$1,034,483
$1,034,483
9,592
$280,689.94 $228,475.88
$753,793.06
$525,317.18
Operating CF
Reclaimed price
Total CF
Rate
CF to parent
PV of parent CF
$502,367.11
NPV
$14,519.78
5
9
3
8,700
3
8,700
$1,034,483
7
8,700
8,700
$487,847.33
From the results we can see that the net value of the project is positive the reason is because the
value of cedi remains constant. If the net value is positive, than the borrower should take the
project. In most of the cases the result is not defined, so in that case the borrower had to check the
exchange rates. The decision of taking or not taking the project is on that if the project has its
exchange rate.