A US multinational corporation has operations in Bolivia through which it plans to sell a new product of 500,000 cans of beans per year for the next 3 years, at a price of BOB 4 per can after incurring a variable cost of BOB 2.50 per can. The company will also incur a fixed cost of BOB 120,000 per year. The company has invested BOB 900,000 today in
A US multinational corporation has operations in Bolivia through which it plans to sell a new product of 500,000 cans of beans per year for the next 3 years, at a price of BOB 4 per can after incurring a variable cost of BOB 2.50 per can. The company will also incur a fixed cost of BOB 120,000 per year. The company has invested BOB 900,000 today in
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:A US multinational corporation has
operations in Bolivia through which it plans
to sell a new product of 500,000 cans of
beans per year for the next 3 years, at a
price of BOB 4 per can after incurring a
variable cost of BOB 2.50 per can. The
company will also incur a fixed cost of BOB
120,000 per year. The company has
invested BOB 900,000 today in
manufacturing equipment for its Bolivian
operations, which will be depreciated to $0
at the end of its 3-year life. The
corporation's required rate of return is 20%
and has a tax rate of 25%. The spot rate
was BOB 6.91/$ before it unexpectedly
changed to BOB 7.25/$.
What is the value of the Bolivian operations
after the unexpected change in the spot
rate assuming the operations have a 3-year
life only? (round to the nearest dollar)
Group of answer choices
US$159,076
US$237,699
US$166,903
US$107,453
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