Answer to Question #228448 in Financial Math for PRO

Question

Mehnaz, Inc., just constructed a manufacturing plant in Dhaka, Bangladesh. The construction cost

is Tk. 1,000,000. Mehnaz intends to operate the plant for three years. During the three years of

operation, cash flows are expected to be 400,000 Tk., 400,000 Tk., and 400,000 Tk., respectively.

Operating cash flows will begin one year from today and all cash flows are remitted back to the parent

at the end of each year as the government of BD will allow to remit fund during the term of project.

Withholding tax imposed by BD government is 15% on remitted amount. At the end of the third year,

Mehnaz expects to sell the plant for 300,000 Tk. Mehnaz has a required rate of return of 15 percent.

It currently takes 90 Tk. to buy 1 U.S. dollar, and the Tk. is expected to depreciate by 5 Tk. at the end

of first year.