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13.1 You work for an Israeli company that is considering an investment in China’s Sichuan… 1 answer below » 13.1 You work for an Israeli company that is considering an investment in China’s Sichuan province. The investment yields expected after-tax Chinese new yuan cash flows (in millions) as follows: CNY200 CNY500 CNY300 –CNY600 Year 1 Year 2 Year View complete question » 13.1 You work for an Israeli company that is considering an investment in China’s Sichuan province. The investment yields expected after-tax Chinese new yuan cash flows (in millions) as follows: CNY200 CNY500 CNY300 –CNY600 Year 1 Year 2 Year 3 Expected inflation is 6 percent in shekels and 3 percent in yuan. Required returns for this risk class are iILS = 15 percent in Israeli shekels and 11.745 percent in yuan. The spot exchange rate is S0 0.5526/CNY. Assume the international parity conditions hold. ILS/CNY = ILS a. Calculate V0 ILS CNY by discounting at the appropriate risk-adjusted yuan |i |i rate iCNY and then converting into shekels at the current spot rate. b. Calculate V0 ILS ILS by converting yuan into shekels at expected future spot rates and then discounting at the appropriate rate in shekels. View less » Nov 16 2015 01:03 PM
