Principles of Corporate Finance
13th Edition
ISBN: 9781260465099
Author: BREALEY, Richard
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 27, Problem 21PS
a)
Summary Introduction
To determine:
b)
Summary Introduction
To determine: Dollar cash flow and NPV
c)
Summary Introduction
To determine: The effects of the value of project if the company expects euro to
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Sub : FinancePls answer very fast.I ll upvote CORRECT ANSWER . Thank You
A French company is considering a project in US. The project will cost $100M. The cash flows are expected to be $30M per year for 5 years. The current spot exchange rate is $1.20/ . The risk-free rate in the US is 1%, and the risk-free rate in Europe is 2%. The dollar required return on the project is 12%. Find the NPV in home currency using home currency approach.
Please note correct answer is $7.1 million. please show detailed workings.
Suppose that you are the CFO of Google with an extra U.S. $20 Million to invest for one year. You are considering the purchase of U.S. T-bills that yield 4% per year. The spot exchange rate is $1.00 = €0.90, and the one-year forward rate is $1.00 = €0.95 . What must the interest rate in the Eurozone (on an investment of comparable risk) be before you are willing to consider investing there instead of the US?
a.
9.78%
b.
1.56%
c.
4.00%
d.
5.56%
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?
Chapter 27 Solutions
Principles of Corporate Finance
Ch. 27 - Exchange rates Look at Table 27.1. a. How many...Ch. 27 - Exchange rates Table 27.1 shows the 3-month...Ch. 27 - Prob. 3PSCh. 27 - Prob. 4PSCh. 27 - Prob. 5PSCh. 27 - Prob. 6PSCh. 27 - Prob. 8PSCh. 27 - Prob. 9PSCh. 27 - Prob. 10PSCh. 27 - Currency risk Companies may be affected by changes...
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