Convert the initial investment and annual ZAR cash flows into AED using the given actual spot exchange rates.

Here are the NPV calculations for the project in AED:

c) What is the NPV in AED if the actual pattern of ZAR/AED exchange rates is: S(0) = 3.75; S(1) = 5.7; S(2) = 6.7; S(3) = 7.2; S(4) = 7.7; and S(5) = 8.2?

Step 1: Convert the initial investment and annual ZAR cash flows into AED using the given actual spot exchange rates. The exchange rate is given as ZAR/AED, meaning 1 AED = X ZAR. To convert ZAR to AED, divide the ZAR amount by the exchange rate. Initial Investment (Year 0): $CF_0^{AED} = -\frac{ZAR 10,000,000}{3.75 ZAR/AED} = -AED 2,666,666.67$ Cash Flow Year 1: $CF_1^{AED} = \frac{ZAR 3,000,000}{5.7 ZAR/AED} \approx AED 526,315.79$ Cash Flow Year 2: $CF_2^{AED} = \frac{ZAR 4,000,000}{6.7 ZAR/AED} \approx AED 597,014.93$ Cash Flow Year 3: $CF_3^{AED} = \frac{ZAR 5,000,000}{7.2 ZAR/AED} \approx AED 694,444.44$ Cash Flow Year 4: $CF_4^{AED} = \frac{ZAR 6,000,000}{7.7 ZAR/AED} \approx AED 779,220.78$ Cash Flow Year 5: $CF_5^{AED} = \frac{ZAR 7,000,000}{8.2 ZAR/AED} \approx AED 853,658.54$

Step 2: Calculate the present value of each AED cash flow using the parent firm's cost of capital ($k_{AED} = 9.5\% = 0.095$). $PV_t = \frac{CF_t^{AED}}{(1 + k_{AED})^t}$ $PV_0 = -AED 2,666,666.67$ $PV_1 = \frac{AED 526,315.79}{(1 + 0.095)^1} = \frac{AED 526,315.79}{1.095} \approx AED 480,653.69$ $PV_2 = \frac{AED 597,014.93}{(1 + 0.095)^2} = \frac{AED 597,014.93}{1.199025} \approx AED 497,917.47$ $PV_3 = \frac{AED 694,444.44}{(1 + 0.095)^3} = \frac{AED 694,444.44}{1.312822375} \approx AED 529,000.00$