Videsh Ventures, a Mumbai-based company, is considering a project to be set up in the U.S. The project will entail an initial outlay o $200 million and is expected to generate the following cash flow...

U.S. The project will entail an initial outlay o $200 million and is expected to generate the

following cash flow over its five year life:

Year                      1         2        3      4       5

Cash flow            $50    $70    $90   $105  $80

(in million)

The current spot exchange rate is Rs.46 per U.S. dollar, the risk-free rate in India is 11 per cent

and the risk-free rate in the U.S. is 6 per cent.

Videsh Venture’s required rupee return on a project of this kind is 18 per cent.

Calculate the NPV of the project using the home currency approach.