XY Limited is engaged in large retail business in India. It is contemplating for expansion into a country of Africa by acquiring a group of stores…

XY Limited is engaged in large retail business in India. It is contemplating for expansion into a country of Africa by acquiring a group of stores having the same line of operation as that of India. The exchange rate for the currency of the proposed African country is extremely volatile. Rate of inflation is presently 40% a year. Inflation in India is currently 10% a year. Management of XY Limited expects these rates likely to continue for the foreseeable future. Estimated projected cash flows, in nominal terms, in India as well as African country for the first three years of the project are as follows: Year - 0 Year - 1 Year - 2 Year - 3 Cash flows in Indian ₹ (000) -200000 -6600 -10000 -13000 Cash flows in African Rands (000) -800000 +280000 +550000 +1000000 XY Ltd. assumes the year 3 nominal cash flows will continue to be earned each year indefinitely. It evaluates all investments using nominal cash flows and a nominal discounting rate. The present exchange rate is African Rand 6 to 1. You are required to calculate the net present value of the proposed investment considering the fact that the company uses discounting rate of 10.80% to evaluate any project but to reflect high risk of this project it is considering to adjust a risk premium of 8.30% Note: - 1. Use PV Factors upto 3 decimal points. 2. Use Exchange Rates upto 4 decimal points. 3. Compute final calculation in multiple of 000and round off them upto zero. 4. Ignore taxation.