It is 2024 and Carpet Baggers Inc. is proposing to construct a new bagging plant in a country in Europe. The two prime candidates ar Germany and Switzerland. The forecast cash flows from the proposed plants are as follows: C2 +16 C4 C6 IRR(%) CO C1 C3 C5 Germany (millions of euros) -79 +11 +16 +21 +21 +21 8.2 Switzerland (millions of Swiss francs) -139 +21 +31 +31 +36 +36 +36 9.1 The spot exchange rate for euros is USD1.4 = EUR1, while the rate for Swiss francs is CHF1.6 = USD1. The interest rate is 10% in the United States, 3% in Switzerland, and 5% in the euro countries. The financial manager has suggested that if the cash flows were stated in dollars, a return in excess of 12% would be acceptable. a. What is the dollar NPV of the German project? b. What is the dollar NPV of the Swiss project? c. Should the company go ahead with the German project, the Swiss project, or neither? (For requirements a & b, do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) a. NPV of German project b. NPV of Swiss project The company should choose million million C.
It is 2024 and Carpet Baggers Inc. is proposing to construct a new bagging plant in a country in Europe. The two prime candidates ar Germany and Switzerland. The forecast cash flows from the proposed plants are as follows: C2 +16 C4 C6 IRR(%) CO C1 C3 C5 Germany (millions of euros) -79 +11 +16 +21 +21 +21 8.2 Switzerland (millions of Swiss francs) -139 +21 +31 +31 +36 +36 +36 9.1 The spot exchange rate for euros is USD1.4 = EUR1, while the rate for Swiss francs is CHF1.6 = USD1. The interest rate is 10% in the United States, 3% in Switzerland, and 5% in the euro countries. The financial manager has suggested that if the cash flows were stated in dollars, a return in excess of 12% would be acceptable. a. What is the dollar NPV of the German project? b. What is the dollar NPV of the Swiss project? c. Should the company go ahead with the German project, the Swiss project, or neither? (For requirements a & b, do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) a. NPV of German project b. NPV of Swiss project The company should choose million million C.
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:It is 2024 and Carpet Baggers Inc. is proposing to construct a new bagging plant in a country in Europe. The two prime candidates are
Germany and Switzerland. The forecast cash flows from the proposed plants are as follows:
CO
C1
+11
C5
C6
C2
C3
C4
IRR(%)
8.2
Germany (millions of euros)
Switzerland (millions of Swiss
-79
+16
+16
+21
+21
+21
-139
+21
+31
+31
+36
+36
+36
9.1
francs)
The spot exchange rate for euros is USD1.4 = EUR1, while the rate for Swiss francs is CHF1.6 = USD1. The interest rate is 10% in the
United States, 3% in Switzerland, and 5% in the euro countries. The financial manager has suggested that if the cash flows were stated
in dollars, a return in excess of 12% would be acceptable.
a. What is the dollar NPV of the German project?
b. What is the dollar NPV of the Swiss project?
c. Should the company go ahead with the German project, the Swiss project, or neither?
(For requirements a & b, do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
a. NPV of German project
b. NPV of Swiss project
The company should choose
million
million
C.
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