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Hello sir,
When forecasting the spot rates to be used for the component costs how come it was not adjusted for just 6 months in the year 1 calculation as the question said the expected spot rate is 3.03 in 6 months time?The project starts in 6 months time.
Therefore time 0 (the start of the first year) is in 6 months time when the exchange rate is expected to be 3.03.
The first year of operation finishes 12 months after the start of the project and therefore the 3.03 needs changing (using PPP) for 12 months.
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