Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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A project has an initial cost of £1.2 million and expected cash inflows of £400,000, £500,000, and £600,000 for Years 1 to 3, respectively. Assume the
current spot rate is £73 and the nominal risk-free returns are 4 percent in the U.K. and 3 percent in the U.S. If uncovered interest rate parity exists, what is
the net present value of this project in U.S. dollars using the home currency approach? Assume the project's U.S. discount rate is 12 percent
Multiple Choice
O -$56.359
-$104,040
-$71,067
$26,422
$92.009
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Transcribed Image Text:A project has an initial cost of £1.2 million and expected cash inflows of £400,000, £500,000, and £600,000 for Years 1 to 3, respectively. Assume the current spot rate is £73 and the nominal risk-free returns are 4 percent in the U.K. and 3 percent in the U.S. If uncovered interest rate parity exists, what is the net present value of this project in U.S. dollars using the home currency approach? Assume the project's U.S. discount rate is 12 percent Multiple Choice O -$56.359 -$104,040 -$71,067 $26,422 $92.009
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