A U. S company is considering a high-technology project in a foreign country. The estimated economic results for the project (after taxes), in the foreign currency (T-marks), is shown in the following table for the seven-year analysis period being used. The company requires an 18% rate of return in U. S. dollars (after taxes) on any investments in this foreign country.

End of Year Cash Flow (T-marks after Taxes)

0 -3,600,000

1 450,000

2 1,500,000

3 1,500,000

4 1,500,000

5 1,500,000

6 1,500,000

7 1,500,000

a. Should the project be approved, based on a PW analysis in U. S. dollars, if the devaluation of the T-mark, relative to the U. S. dollar, is estimated to average 12% per year and the present exchange rate is 20 T-marks per dollar?

b. What is the IRR of the project in T-marks?

c. Based on your answer to (b), what is the IRR in U. S. dollars?