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

See similar textbooks

Similar questions

In this question they say that lenders would need a promised payment of 80 million. How is this solved for in question d. How can i derive this mathmatically
Vijay
1.
13. The IBC Company is considering undertaking an investment that promises to have the following cash flows Period 0 is = -$100 Period 1 is= $150 Period 2 is = $50 Period 3 is = $50 If it waits a year, it can invest in an alternative (that is, mutually exclusive) investment that promises to pay Period 1 Period 2 Period 3 −$150 $250 $50 Assume a time value of money of 0.05. Which investment should the firm undertake? Use the present value method and the internal rate of return approaches. With the IRR approach, use the incremental cash flows.
In New York, you can exchange $1 for €0.8575 or £0.7. Suppose that, in Berlin, £1 costs €1.1515. How much profit can you earn on $10,998 using triangle arbitrage?
Consider the following international investment opportunity. It involves a gold mine that can be opened at a cost, then produces a positive cash flow, but then requires environmental clean-up. Year 0 + -€64,000 Year 1 Year 2 €160,000 -€100,000 The current exchange rate is $1.60 = €1.00. The inflation rate in the U.S. is 6 percent and in the euro zone 2 percent. The appropriate cost of capital to a U.S.-based firm for a domestic project of this risk is 8 percent. Find the euro-zone cost of capital. Write it down in percent with two decimals places.
29. You are analyzing a potential 3-year investment in Switzerland. It will require an initial investment of SFr 540,000.00 and is forecasted to yield cashflows of SFr 540,000.00 for the next 3 years. As of today, the spot exchange rate is $0.6667 / SFr and the rates of inflation expected to prevail for the next year in the US is 7% and in 8% in Switzerland. Your estimated cost of capital in dollars is 16.7%. What is the NPV in dollars? (a) $425,391.63 (b) $245,409.63 (c) $638,055.54 (d) $548,449.87 (e) None of the above
International Finance Management
It is the year 2021 and Pork Barrels, Inc., is considering construction of a new barrel plant in Spain. The forecasted cash flows in millions of euros are as follows: C0 C1 C2 C3 C4 C5 –95 +25 +35 +38 +42 +40 The spot exchange rate is $1.35 = €1. The interest rate in the United States is 8%, and the euro interest rate is 6%. You can assume that pork barrel production is effectively risk-free. a-1. Calculate the NPV of the euro cash flows from the project. a-2. What is the NPV in dollars? b. What are the dollar cash flows from the project if the company hedges against exchange rate changes?
Subject:- finance
Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow -$590,000 O 1 2 3 4 220,000 163,000 228,000 207,000 All cash flows will occur in Erewhon and are expressed in dollars. In an attempt to improve its economy, the Erewhonian government has declared that all cash flows created by a foreign company are "blocked" and must be reinvested with the government for one year. The reinvestment rate for these funds is 7 percent. Assume Anderson uses a required return of 13 percent on this project. a. What is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the IRR of the project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Synergy Incorporated, a US based Multinational Company (MNC) manufacturing electrical appliances. The company currently having problem of increasing in labor cost and therefore it affects the company's has profit. The company has decided to reduce the cost. The Board of Directors is considering building a plant in South East Asia, Singapore and Indonesia are countries under consideration. Below are the estimatedcash flow and exchange rate for both countries. Singapore Indonesia Forecasted Cash Flow Forecasted Exchange Year Cash Flow (IND) Exchange (SGD) (USD/SGD) (USD/IDR) 2017 (300,000) SGD4.4852 (5,200,000) IDR49.582 2018 65,000 SGD4.0614 1,500,000 IDR49.9648 2019 52,000 SGD4.1323 1,600,000 IDR52.4211 2020 60,000 SGD4.0905 1,800,000 IDR50.6107 2021 75,000 SGD4.4028 2,500,000 IDR51.3034 Based on the information, compute the potential investment's net present value (NPV) for Singapore and Indonesia if the company has weighted cost of capital of 10 and 12 percent. Suggest which location…

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS