Sun Ltd. manufactures high-quality modern furniture and sells to retail outlets in India and Nepal. Since the cost of quality wood in India is very…

Sun Ltd. manufactures high-quality modern furniture and sells to retail outlets in India and Nepal. Since the cost of quality wood in India is very high, the company is reviewing the proposal for import of wood in bulk from Nepalese supplier. The estimate of net Indian (₹) and the Nepalese Currency (NC) cash flows for this proposal is as follows: Net Cash Flow (in millions) Year 0 1 2 3 NC (75.000) 7.800 11.400 12.300 Indian (₹) 0 8.607 12.600 13.800 Other information is as under: (i) Sun Ltd. evaluates all investments by using a discount rate of 8% per annum. All Nepalese customers are invoiced in NC. NC cash flows are converted to Indian currency (₹) at the forward rate and discounted at the Indian rate. (ii) Inflation rates in Nepal and India are expected to be 8% and 6% per annum respectively. The current exchange rate is 1 = NC 1.60. You are required to Compute the Net Present Value (NPV) of the proposal and show your recommendation. PVF @ 8% Year 1 2 3 PVF 0.926 0.857 0.794 Calculation up to 3 decimal points.