About the investment opportunity

Assignment Help Financial Management

Reference no: EM13728708

Lakonishok Equipment has an investment opportunity in Europe. The project costs €12 million and is expected to produce cash flows of €1.8 million in Year 1, €2.6 million in Year 2, and €3.5 million in Year 3. The current spot exchange rate is $1.36/€; the current risk-free rate in the United States is 2.3 percent, compared to that in Europe of 1.8 percent. The appropriate discount rate for the project is estimated to be 13 percent, the U.S. cost of capital for the company. In addition, the subsidiary can be sold at the end of three years for an estimated €8.9 million. What is the NPV of the project? (Enter your answer in thousands of dollars, not in millions. (e.g., 1,234,567). Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Reference no: EM13728708

Questions Cloud

Calculate the degree of operating leverage : A company is producing new headphones, but 1st management wants to determine its degree of operating leverage. The company has a base level of sales of 477,810 units. Sales price unit is $137.75 and variable cost per unit is $94.08. Total annual oper..

Evaluate your legal rights as a franchisee : Assignment : Your Own Franchise, evaluate the phase of the franchise to conclude what the next logical phase will be. Support your response, Evaluate your legal rights as a franchisee to determine if they favor the franchisor or the franchisee, or bo..

Which rate of return does the investor expect to receive : A company's common stock is currently selling for $54 per share. Last year, the company paid dividends of $2.98 per share. The projected growth at a rate of dividends for this stock is 4.93%. Which rate of return does the investor expect to receive o..

What is the firms weighted average cost of capital : R.S. Green has 250,000 shares of common stock outstanding at a market price of $28 a share. Next year's annual dividend is expected to be $1.55 a share. The dividend growth rate is 2 percent. The firm also has 7,500 bonds outstanding with a face valu..

About the investment opportunity : Lakonishok Equipment has an investment opportunity in Europe. The project costs €12 million and is expected to produce cash flows of €1.8 million in Year 1, €2.6 million in Year 2, and €3.5 million in Year 3. The current spot exchange rate is $1.36/€..

Director of countryside care center : Craig is a safety consultant in the mid-west. He received a telephone call from the Director of Countryside Care Center (a 207-bed nursing home facility in Aurora, Illinois that employs 65-70 nurse aides to work with residents and a total staff of..

Impact on the consolidated financial statements : Prepare a report, which shows your research into the reasons for success or failure of acquisitions in general - Potential advantages of each of the acquisitions in 2010 for Novartis Group.

How firm established and maintained : Identify in detail types of customer relationship, and how firm established and maintained them are thoroughly discussed

Convert the projected franc flows into dollar flows : You are evaluating a proposed expansion of an existing subsidiary located in Switzerland. The cost of the expansion would be SF 21 million. The cash flows from the project would be SF 5.9 million per year for the next five years. The dollar required ..

User Account

All Pages