1) Refer to Table 19.1. The NPV for the British investment is estimated at _____
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Question
1) Refer to Table 19.1. The NPV for the British investment is estimated at ________.
A) $3,092
B) $6,420
C) ?3,092
D) $0
Answer: A
2) Refer to Table 19.1. The NPV for the European investment is estimated at ________.
A) euro 4,945
B) $4,945
C) $6,420
D) euro 6,420
Answer: B
3) Refer to Table 19.1. Which of the following best summarizes the preliminary results of the investment analysis for the two prospective investments.
A) The British investment should be accepted, the European investment rejected.
B) The British investment is superior to the European investment.
C) Both investments are acceptable.
D) None of the above is true.
Answer: C
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Explanation / Answer
PV = cash flow/ (1+i)^n where i = 12% and n is the number of period
NPV of european investment
NPV = sum of PV of all inflows - sum of PV of all outflows
Britain - 1 2 3 Total cash inflow in pounds - 8,000 8,000 8,000 Total cash outflow in pounds 15,000 1,000 1,000 1,000 additional cash inflow in $ - 500 500 500 Exchange rate 2 1 1 1 In $ Total cash inflow in dollars - 11,680 11,600 11,520 Total cash outflow in dollars 22,500 1,460 1,450 1,440 additional cash inflow in $ - 500 500 500 Total cash inflow - 12,180 12,100 12,020 PV - 10,875 9,646 8,556 Total cash outflow in dollars 22,500 1,460 1,450 1,440 PV 22,500 1,304 1,156 1,025 NPV 3,092Related Questions
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