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Chapter 3
NPV analysis for foreign projects
3.1 Calculating the NPV
1 Forecast the project’s post tax cash flows in the foreign currency.
2 Convert the cash flows to the home currency.
3 Add any home country cash flows e.g. tax adjustments.
4 Discount the net (home currency) cash flows using a suitable home
country cost of capital.
5 Sum the discounted cash flows to give the NPV.
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