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International Foods Corporation, a U.S.-based food company, is considering expanding its soup-processing operations in Switzerland. The company plans a net investment of $7 million in the project. The current spot exchange rate is SF5.5 per dollar (SF = Swiss francs). Net cash flows for the expansion project are estimated to be SF6 million for 12 years and nothing thereafter. Based on its analysis of current conditions in Swiss capital markets, International Foods has determined that the applicable cost of capital for the project is 19 percent. Calculate the net present value of the proposed expansion project. Use Table IV to answer the questions below. Enter your answer in millions. For example, an answer of $1.20 million should be entered as 1.20, not 1,200,000. Round your answer to two decimal places.

International Foods Corporation, a U.S.-based food company, is considering expanding its soup-processing operations in Switzerland. The company plans a net investment of $7 million in the project. The current spot exchange rate is SF5.5 per dollar (SF = Swiss francs). Net cash flows for the expansion project are estimated to be SF6 million for 12 years and nothing thereafter. Based on its analysis of current conditions in Swiss capital markets, International Foods has determined that the applicable cost of capital for the project is 19 percent. Calculate the net present value of the proposed expansion project. Use Table IV to answer the questions below. Enter your answer in millions. For example, an answer of $1.20 million should be entered as 1.20, not 1,200,000. Round your answer to two decimal places.

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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International Foods Corporation, a U.S.-based food company, is considering expanding its soup-processing operations in Switzerland. The company plans a net investment of $7 million in the project. The current spot exchange rate is SF5.5 per dollar (SF = Swiss francs). Net cash flows for the expansion project are estimated to be SF6 million for 12 years and nothing thereafter. Based on its analysis of current conditions in Swiss capital markets, International Foods has determined that the applicable cost of capital for the project is 19 percent. Calculate the net present value of the proposed expansion project. Use Table IV to answer the questions below. Enter your answer in millions. For example, an answer of $1.20 million should be entered as 1.20, not 1,200,000. Round your answer to two decimal places.

TABLE M Present Value of an Annuity Interest Factor (PVIFA) ($1 per period at Po per period for n periods); PVIFA ; PVAN, = PMT (PVIFA;,n) Period, n 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 0.901 12% 0.893 13% 1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.885 1.970 1.942 1.913 1.886 1.859 1.833 1.808 1.783 1.759 2.531 1.736 1.713 1.690 1.668 2.941 2.884 2.829 2.775 2.723 2.673 2.624 2.577 2.487 2.444 2.402 2.361 3.902 3.808 3.717 3.387 3.037 3.630 4.452 3.546 3.465 3.312 3.240 3.170 3.791 3.102 2.974 4.853 4.713 4.580 4.329 4.212 4.100 3.993 3.890 3.696 3.605 3.517 5.795 5.601 5.417 5.242 5.076 4.917 4.766 4.623 4.486 4.355 4.231 4.111 3.998 5.033 5.535 5.995 6.418 6.805 7.161 7.487 6.728 6.472 6.230 6.002 5.786 5.582 5.389 5.206 4.868 4.712 4.564 4.423 7.652 7.325 7.020 6.733 6.463 6.210 5.971 5.747 6.247 5.335 5.759 6.145 6.495 5.146 4.968 5.328 4.799 8.162 7.786 5.132 5.426 8.566 7.435 7.108 6.802 6.515 5.537 10 9.471 8.983 8.530 8.111 7.722 7.360 7.024 7.499 6.710 5.889 5.650 11 10.368 9.787 9.253 8.760 8.306 7.887 7.139 6.207 5.938 5.687 12 11.255 10.575 9.954 9.385 8.863 8.384 7.943 7.536 6.814 6.492 6.750 6.194 5.918 13 12.134 11.348 10.635 9.986 9.394 8.853 8.358 7.904 7.103 6.424 6.122 14 13.004 12.106 11.296 10.563 9.899 9.295 7.786 8.745 9.108 8.244 8.559 7.367 6.982 6.628 6.302 6.462 15 13.865 12.849 11.938 11.118 10.380 9.712 8.061 7.606 7.191 6.811 16 14.718 13.578 12.561 11.652 10.838 10.106 9.447 8.851 8.312 7.824 7.379 6.974 6.604 11.274 9.763 8.544 8.756 8.950 17 15.562 14.292 13.166 12.166 10.477 9.122 8.022 7.549 7.120 6.729 18 16.398 14.992 13.754 12.659 11.690 10.828 10.059 9.372 8.201 7.702 7.250 6.840 7.839 7.963 19 17.226 15.678 14.324 13.134 12.085 11.158 10.336 9.604 8.365 7.366 6.938 7.469 7.784 20 18.046 16.351 14.877 13.590 12.462 11.470 10.594 9.818 9.128 8.514 7.025 24 21.243 18.914 16.936 15.247 13.799 12.550 11.469 10.529 9.707 8.985 8.348 7.283 25 22.023 19.523 17.413 15.622 14.094 12.783 11.654 10.675 8.422 9.823 10.274 9.077 7.843 7.330 30 25.808 22.397 19.600 17.292 15.373 13.765 12.409 11.258 9.427 8.694 8.055 7.496 10.757 10.962 40 32.835 27.355 23.115 19.793 17.159 15.046 13.332 11.925 9.779 8.951 8.244 7.634 50 39.196 31.424 25.730 21.482 18.256 15.762 13.801 12.233 9.915 9.042 8.304 7.675 60 44.955 34.761 27.676 22.623 18.929 16.161 14.039 12.377 11.048 9.967 9.074 8.324 7.687 Period, n 14% 15% 16% 17% 18% 19% 20% 24% 28% 32% 36% 40% 0.870 1.626 2.283 0.840 0.758 1.332 1.766 2.096 0.877 0.862 0.855 0.847 0.833 0.806 0.781 0.735 0.714 1.605 2.246 1.585 2.210 2.743 2 1.647 2.322 1.566 1.547 1.528 1.457 1.981 1.392 1.868 1.276 1.674 1.966 1.224 2.174 2.690 3.127 3 2.140 2.106 2.589 2.991 1.589 4 2.914 2.855 2.798 2.639 3.058 2.404 2.241 1.849 3.433 3.352 3.274 3.199 2.745 2.532 2.345 2.181 2.035 6 2.534 2.168 3.889 4.288 3.784 3.685 3.589 3.498 3.410 3.326 3.020 3.242 2.759 2.399 7 4.160 4.039 3.922 3.812 3.706 3.605 2.937 2.678 2.455 2.263 8. 4.639 4.487 4.344 4.207 4.078 3.954 3.837 3.421 3.076 2.786 2.540 2.331 9. 4.946 4.772 4.607 4.451 4.303 4.163 4.031 2.868 3.566 3.682 3.184 2.603 2.379 2.650 2.683 10 5.216 5.019 4.833 5.029 4.659 4.494 4.339 4.193 3.269 2.930 2.414 11 5.453 5.234 4.836 4.656 4.486 4.327 3.776 3.335 2.978 2.438 5.421 5.583 12 5.660 5.197 4.988 4.793 4.611 4.439 3.851 3.387 3.013 2.708 2.456 2.469 13 5.842 6.002 6.142 5.342 5.118 4.910 4.715 4.533 3.912 3.427 3.040 2.727 5.229 5.324 5.008 3.061 3.076 14 5.724 2.478 5.468 5.575 4.802 4.611 3.962 3.459 2.740 3.483 3.503 15 5.847 5.092 4.876 4.675 4.001 2.750 2.484 16 6.265 4.938 4.033 5.954 6.047 5.669 5.405 5.162 4.730 3.088 2.758 2.489 17 6.373 5.749 5.475 5.534 5.584 5.628 5.746 5.222 4.990 4.775 4.059 3.518 3.097 2.763 2.492 18 6.467 6.128 5.818 5.273 3.529 5.033 5.070 4.812 4.080 3.104 2.767 2.494 19 6.550 6.198 5.877 5.316 4.844 4.097 3.539 3.109 2.770 2.496 20 6.623 6.259 5.929 5.353 5.101 4.870 4.110 3.546 3.113 2.772 2.497 24 6.835 6.434 6.073 5.451 5.182 4.937 4.143 3.562 3.121 2.776 2.499 25 6.873 6.464 6.097 5.766 5.467 5.195 4.948 4.147 3.564 2.776 3.122 3.124 2.499 30 7.003 6.566 6.177 5.829 5.517 5.235 4.979 4.160 3.569 2.778 2.778 2.500 40 7.105 6.642 6.233 5.871 5.548 5.258 4.997 4.166 3.571 3.125 2.500 50 7.133 6.661 6.246 5.880 5.554 5.262 4.999 4.167 3.571 3.125 2.500 2.778 2.778 60 7.140 6.665 6.249 5.882 5.555 5.263 5.000 4.167 3.571 3.125 2.500 234 567 090
Transcribed Image Text:TABLE M Present Value of an Annuity Interest Factor (PVIFA) ($1 per period at Po per period for n periods); PVIFA ; PVAN, = PMT (PVIFA;,n) Period, n 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 0.901 12% 0.893 13% 1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.885 1.970 1.942 1.913 1.886 1.859 1.833 1.808 1.783 1.759 2.531 1.736 1.713 1.690 1.668 2.941 2.884 2.829 2.775 2.723 2.673 2.624 2.577 2.487 2.444 2.402 2.361 3.902 3.808 3.717 3.387 3.037 3.630 4.452 3.546 3.465 3.312 3.240 3.170 3.791 3.102 2.974 4.853 4.713 4.580 4.329 4.212 4.100 3.993 3.890 3.696 3.605 3.517 5.795 5.601 5.417 5.242 5.076 4.917 4.766 4.623 4.486 4.355 4.231 4.111 3.998 5.033 5.535 5.995 6.418 6.805 7.161 7.487 6.728 6.472 6.230 6.002 5.786 5.582 5.389 5.206 4.868 4.712 4.564 4.423 7.652 7.325 7.020 6.733 6.463 6.210 5.971 5.747 6.247 5.335 5.759 6.145 6.495 5.146 4.968 5.328 4.799 8.162 7.786 5.132 5.426 8.566 7.435 7.108 6.802 6.515 5.537 10 9.471 8.983 8.530 8.111 7.722 7.360 7.024 7.499 6.710 5.889 5.650 11 10.368 9.787 9.253 8.760 8.306 7.887 7.139 6.207 5.938 5.687 12 11.255 10.575 9.954 9.385 8.863 8.384 7.943 7.536 6.814 6.492 6.750 6.194 5.918 13 12.134 11.348 10.635 9.986 9.394 8.853 8.358 7.904 7.103 6.424 6.122 14 13.004 12.106 11.296 10.563 9.899 9.295 7.786 8.745 9.108 8.244 8.559 7.367 6.982 6.628 6.302 6.462 15 13.865 12.849 11.938 11.118 10.380 9.712 8.061 7.606 7.191 6.811 16 14.718 13.578 12.561 11.652 10.838 10.106 9.447 8.851 8.312 7.824 7.379 6.974 6.604 11.274 9.763 8.544 8.756 8.950 17 15.562 14.292 13.166 12.166 10.477 9.122 8.022 7.549 7.120 6.729 18 16.398 14.992 13.754 12.659 11.690 10.828 10.059 9.372 8.201 7.702 7.250 6.840 7.839 7.963 19 17.226 15.678 14.324 13.134 12.085 11.158 10.336 9.604 8.365 7.366 6.938 7.469 7.784 20 18.046 16.351 14.877 13.590 12.462 11.470 10.594 9.818 9.128 8.514 7.025 24 21.243 18.914 16.936 15.247 13.799 12.550 11.469 10.529 9.707 8.985 8.348 7.283 25 22.023 19.523 17.413 15.622 14.094 12.783 11.654 10.675 8.422 9.823 10.274 9.077 7.843 7.330 30 25.808 22.397 19.600 17.292 15.373 13.765 12.409 11.258 9.427 8.694 8.055 7.496 10.757 10.962 40 32.835 27.355 23.115 19.793 17.159 15.046 13.332 11.925 9.779 8.951 8.244 7.634 50 39.196 31.424 25.730 21.482 18.256 15.762 13.801 12.233 9.915 9.042 8.304 7.675 60 44.955 34.761 27.676 22.623 18.929 16.161 14.039 12.377 11.048 9.967 9.074 8.324 7.687 Period, n 14% 15% 16% 17% 18% 19% 20% 24% 28% 32% 36% 40% 0.870 1.626 2.283 0.840 0.758 1.332 1.766 2.096 0.877 0.862 0.855 0.847 0.833 0.806 0.781 0.735 0.714 1.605 2.246 1.585 2.210 2.743 2 1.647 2.322 1.566 1.547 1.528 1.457 1.981 1.392 1.868 1.276 1.674 1.966 1.224 2.174 2.690 3.127 3 2.140 2.106 2.589 2.991 1.589 4 2.914 2.855 2.798 2.639 3.058 2.404 2.241 1.849 3.433 3.352 3.274 3.199 2.745 2.532 2.345 2.181 2.035 6 2.534 2.168 3.889 4.288 3.784 3.685 3.589 3.498 3.410 3.326 3.020 3.242 2.759 2.399 7 4.160 4.039 3.922 3.812 3.706 3.605 2.937 2.678 2.455 2.263 8. 4.639 4.487 4.344 4.207 4.078 3.954 3.837 3.421 3.076 2.786 2.540 2.331 9. 4.946 4.772 4.607 4.451 4.303 4.163 4.031 2.868 3.566 3.682 3.184 2.603 2.379 2.650 2.683 10 5.216 5.019 4.833 5.029 4.659 4.494 4.339 4.193 3.269 2.930 2.414 11 5.453 5.234 4.836 4.656 4.486 4.327 3.776 3.335 2.978 2.438 5.421 5.583 12 5.660 5.197 4.988 4.793 4.611 4.439 3.851 3.387 3.013 2.708 2.456 2.469 13 5.842 6.002 6.142 5.342 5.118 4.910 4.715 4.533 3.912 3.427 3.040 2.727 5.229 5.324 5.008 3.061 3.076 14 5.724 2.478 5.468 5.575 4.802 4.611 3.962 3.459 2.740 3.483 3.503 15 5.847 5.092 4.876 4.675 4.001 2.750 2.484 16 6.265 4.938 4.033 5.954 6.047 5.669 5.405 5.162 4.730 3.088 2.758 2.489 17 6.373 5.749 5.475 5.534 5.584 5.628 5.746 5.222 4.990 4.775 4.059 3.518 3.097 2.763 2.492 18 6.467 6.128 5.818 5.273 3.529 5.033 5.070 4.812 4.080 3.104 2.767 2.494 19 6.550 6.198 5.877 5.316 4.844 4.097 3.539 3.109 2.770 2.496 20 6.623 6.259 5.929 5.353 5.101 4.870 4.110 3.546 3.113 2.772 2.497 24 6.835 6.434 6.073 5.451 5.182 4.937 4.143 3.562 3.121 2.776 2.499 25 6.873 6.464 6.097 5.766 5.467 5.195 4.948 4.147 3.564 2.776 3.122 3.124 2.499 30 7.003 6.566 6.177 5.829 5.517 5.235 4.979 4.160 3.569 2.778 2.778 2.500 40 7.105 6.642 6.233 5.871 5.548 5.258 4.997 4.166 3.571 3.125 2.500 50 7.133 6.661 6.246 5.880 5.554 5.262 4.999 4.167 3.571 3.125 2.500 2.778 2.778 60 7.140 6.665 6.249 5.882 5.555 5.263 5.000 4.167 3.571 3.125 2.500 234 567 090
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