A. You want to invest in a riskless project in Sweden. The project has aninitial cost of SKr2.1 million and is expected to produce cash inflowsof SKr810,000 a year for 3 years. The project will be worthless afterthe first 3 years. The expected inflation rate in Sweden is 2 percentwhile it is 5 percent in the U.S. A risk-free security is paying 6percent in the U.S. The current spot rate is $1 = SKr7.55. What is thenet present value of this project in Swedish krona using the foreigncurrency approach? Assume that the international Fisher effect applies. B. In a recent e-news, you observe that the 6-month forward rate is $1.5031/ Euro. Further, if you invest the dollar, it fetches you interest atthe rate of 2% p.a. In comparison, the interest rate in Eurozone is 1%p.a. You also see that CAD 1.5513 are needed to purchase a Euro and CAD1.332 are needed to buy a US$. Is it possible for you to make an arbitrageprofit? If so, which of the arbitrage strategies will you employ andwhat will be the profit? Assume that interest rate parity holds, and youhave one million dollars available to conduct arbitrage.

A. You want to invest in a riskless project in Sweden. The project has aninitial cost of SKr2.1 million and is expected to produce cash inflowsof SKr810,000 a year for 3 years. The project will be worthless afterthe first 3 years. The expected inflation rate in Sweden is 2 percentwhile it is 5 percent in the U.S. A risk-free security is paying 6percent in the U.S. The current spot rate is $1 = SKr7.55. What is thenet present value of this project in Swedish krona using the foreigncurrency approach? Assume that the international Fisher effect applies. B. In a recent e-news, you observe that the 6-month forward rate is $1.5031/ Euro. Further, if you invest the dollar, it fetches you interest atthe rate of 2% p.a. In comparison, the interest rate in Eurozone is 1%p.a. You also see that CAD 1.5513 are needed to purchase a Euro and CAD1.332 are needed to buy a US$. Is it possible for you to make an arbitrageprofit? If so, which of the arbitrage strategies will you employ andwhat will be the profit? Assume that interest rate parity holds, and youhave one million dollars available to conduct arbitrage.

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter16: Country Risk Analysis

Section: Chapter Questions

Problem 24QA

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You want to invest in a riskless project in Sweden. The project has an initial cost of SKr2.1 million and is expected to produce cash inflows of SKr810,000 a year for 3 years. The project will be worthless after the first 3 years. The expected inflation rate in Sweden is 2 percent while it is 5 percent in the U.S. A risk-free security is paying 6 percent in the U.S. The current spot rate is $1 = SKr7.55. What is the net present value of this project in Swedish krona using the foreign currency approach? Use the international Fisher effect.
You want to invest in a riskless project in Australia. The project has an initial cost of AUD3.86 million and is expected to produce cash inflows of AUD 2 million a year for four years. The project will be worthless after four years. The expected inflation rate in Australia is 3.2 percent while it is 2.8 percent in the U.S. A risk-free security is paying 4.1 percent in the U.S. The current spot rate is AUD7.7274. What is the net present value of this project in Australian Dollar if the international Fisher effect applies?
Sub : FinancePls answer very fast.I ll upvote CORRECT ANSWER . Thank You A French company is considering a project in US. The project will cost $100M. The cash flows are expected to be $30M per year for 5 years. The current spot exchange rate is $1.20/ . The risk-free rate in the US is 1%, and the risk-free rate in Europe is 2%. The dollar required return on the project is 12%. Find the NPV in home currency using home currency approach. Please note correct answer is $7.1 million. please show detailed workings.
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"A French company is considering a project in US. The project will cost $100M. The cash flows are expected to be $30M per year for 5 years. The current spot exchange rate is $1.20/. The risk - free rate in the US is 1%, and the risk - free rate in Europe is 2%. The dollar required return on the project is 12%. Find the NPV in foreign currency using foreign currency approach. The answers below are in millions." -37.281 161.634 8.143 1.631 82.136
A French company is considering a project in US. The project will cost $100M. The cash flows are expected to be $30M per year for 5 years. The current spot exchange rate is $1.20/ . The risk-free rate in the US is 1%, and the risk-free rate in Europe is 2%. The dollar required return on the project is 12%. Find the NPV in home currency using home currency approach. Correct answer is $7.1 million Please answer urgently will upvote
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