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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
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
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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
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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