Consider the investment in China from Problem 13.1.a. Suppose that a manager expects the following future exchange rates: E[S1 E[S2 E[S3 ] = ILS 0.5801/CNY] = ILS 0.6089/CNY] = ILS 0.6392/CNY Using a yuan discount rate of 11.745 percent and the shekel discount rate of 15 percent, calculate NPV from the parent and project perspectives. Should the manager invest in the project? Should the manager hedge the project’s currency risk exposure?b. Repeat part a using the following expected future spot rates of exchange:E[S1 E[S2 E[S3 ] = ILS 0.5575/CNY] = ILS 0.5625/CNY] = ILS 0.5676/CNY Should the manager invest? Should the manager hedge the project’s currency risk exposure?View less »
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