Essay Assignment
a)Explicate the reasons a) a currency depreciation decreases the profitability of a foreign investment (NPV), if the only action that occurs is the depreciation of the currency (rupiah.) This is exemplified by the case of the Semen investment in Indonesia.
Also discuss b) a currency appreciation improving the NPV of the investment, which is the opposite of a.
Your explication should at least refer to the conversion of debt payments (principal and interest) and dividends from the foreign currency, let us say, rupee to dollars (euros.). Everything else presuppose remains constant (ceteris paribus.)
NOTE: This essay deals with the essence of chapter 18. The point it is asking is the key point of the example of the project Semen in Indonesia. Must read the chapter 18 from the book -Eiteman, D. K., Stonehill, A. I., Moffett, M. H., & Kwok, C. (2022). Multinational Business Finance. 16th ed., Pearson.
