An MNC is considering establishing a two-year project in New Zealand with a $30 million initial investment. The firm's cost of capital is 12%. The required rate of return on this project is 18%. The project is expected to generate cash flows of NZ$12 million in Year 1 and NZ$30 million in Year 2, excluding the salvage value. Assume no taxes, and a stable exchange rate of $.60 per NZ$ over the next two years. All cash flows are remitted to the parent. What is the break-even salvage value?
a. about NZ$11 million.
b. about NZ$15 million.
c. about NZ$31 million.
d. about NZ$37 million.
e. about NZ$25 million.
e. about NZ$25 million.
Business
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