You want to invest in a project in Canada. The project has an initial cost of C$1.6 million and is expected to produce cash inflows of C$750,000 a year for 3 years. The project will be worthless after the first 3 years. The expected inflation rate in Canada s 5 percent while it is only 3.5 percent in the U.S. The applicable interest rate for the project in Canada is 12 percent. The current spot rate is C$1 = $0.8637. What is the het present value of this project in Canadian dollars using the foreign currency approach? 1) C$187,924 2) C$ 201,373

You want to invest in a project in Canada. The project has an initial cost of C$1.6 million and is expected to produce cash inflows of C$750,000 a year for 3 years. The project will be worthless after the first 3 years. The expected inflation rate in Canada s 5 percent while it is only 3.5 percent in the U.S. The applicable interest rate for the project in Canada is 12 percent. The current spot rate is C$1 = $0.8637. What is the het present value of this project in Canadian dollars using the foreign currency approach? 1) C$187,924 2) C$ 201,373

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter21: International Cash Management

Section: Chapter Questions

Problem 3ST

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