Ch. 31. International Capital Budgeting Using the Foreign Currency Approach. ABC Company is considering a capital project with the cash flows as stated below in Euros. The project is in Euros and must be converted back to USD. The exchange rate is 0.83 Euros. The difference in the nominal rates between the two currencies is 2 percent. The appropriate discount rate for the project is estimated to be 10%, the US cost of capital for the company. What is the NPV of the project in US Dollars? NPV Year Cash Flows in Euro Year 0 € -2,900,000 Year 1 €1,300,000 Year 2 €1,300,000 Year 3 €1,300,000 Round to the nearest cent and format as "XXX,XXX.XX
I don't understand what is happening in the discounting factor section with the exchange rate the the discount rate and how to go from Discounted Cash flow to the NPV
Ch. 31. International Capital Budgeting Using the Foreign Currency Approach. ABC Company is considering a capital project with the cash flows as stated below in Euros. The project is in Euros and must be converted back to USD. The exchange rate is 0.83 Euros. The difference in the nominal rates between the two currencies is 2 percent.
The appropriate discount rate for the project is estimated to be 10%, the US cost of capital for the company. What is the NPV of the project in US Dollars?
NPV
Year |
Cash Flows in Euro |
Year 0 |
€ -2,900,000 |
Year 1 |
€1,300,000 |
Year 2 |
€1,300,000 |
Year 3 |
€1,300,000 |
Round to the nearest cent and format as "XXX,XXX.XX"
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