sweredAnswerJensen Aquatics Inc., which manufactures and sells scuba gear worldwide, is considering an investment in either Europe or Great Britain.Consider the following cash flows for each project, assume a 12% wacc, and consider these to be average risk projects for the firm. Answerthe questions that follow.BritainTotal cash inflows (E)Total cash outflows (6)Additional dollar cash inflows (5)Forecast exchange rate (S/E)EuropeTotal cash inflows (€)Total cash outflows (0)Additional dollar cash inflows (5)Forecast exchange rate (S/E)euro 4,945$4,945$6,420Year 0 (Today)euro 6,420015,00001.50020,00001.00Refer to Table 16.1. The NPV for the European investment is estimated atYear 1800010005001.4612,00015005000.96Year 2800010005001.4512.00015005000.94Year 3800010005001.4412.00015005000.92

NPV is a capital budgeting tool to decide on whether the capital project is beneficial for the…

W. ws (5) D ws (5) 0 Year 0 (Today) 0 15,000 0 1.50 0 20,000 0 1.00 * Year 1 8000 1000 500 1.46 12,000 1500 500 0.96 Year 2 8000 1000 500 1.45 12.000 1500 500 0.94 Year 3 8000 1000 500 1.44 12.000 1500 500 0.92

W. ws (5) D ws (5) 0 Year 0 (Today) 0 15,000 0 1.50 0 20,000 0 1.00 * Year 1 8000 1000 500 1.46 12,000 1500 500 0.96 Year 2 8000 1000 500 1.45 12.000 1500 500 0.94 Year 3 8000 1000 500 1.44 12.000 1500 500 0.92

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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swered
Answer
Jensen Aquatics Inc., which manufactures and sells scuba gear worldwide, is considering an investment in either Europe or Great Britain.
Consider the following cash flows for each project, assume a 12% wacc, and consider these to be average risk projects for the firm. Answer
the questions that follow.
Britain
Total cash inflows (E)
Total cash outflows (6)
Additional dollar cash inflows (5)
Forecast exchange rate (S/E)
Europe
Total cash inflows (€)
Total cash outflows (0)
Additional dollar cash inflows (5)
Forecast exchange rate (S/E)
euro 4,945
$4,945
$6,420
Year 0 (Today)
euro 6,420
0
15,000
0
1.50
0
20,000
0
1.00
Refer to Table 16.1. The NPV for the European investment is estimated at
Year 1
8000
1000
500
1.46
12,000
1500
500
0.96
Year 2
8000
1000
500
1.45
12.000
1500
500
0.94
Year 3
8000
1000
500
1.44
12.000
1500
500
0.92

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