Calculate the net present value

Assignment Help Finance Basics
Reference no: EM133004925

A US Multinational is considering a European investment opportunity. The size and timing of the after-tax cash flows are as follows: Initial investment required is €800. The cash flows of the following 3 years are €300, €300 and €200. The inflation rate in the euro zone is 2%, and the inflation rate in dollars is 5%. The rate of return required by this US firm is 12%. The current exchange rate is 1.25$/€.

Required:

Please describe the two methods which can be used to calculate the net present value (NPV) to determine if this is a good investment for the US firm. (No calculations required).

Reference no: EM133004925

Questions Cloud

What is the present value of annuity : 1). A Vancouver home renovation firm has quoted a price of $9,800 to fix Mike's back yard.
Critically reflect on the incident in relation : Critically reflect on the incident in relation to the nurse client relationship, communication skills, and outcomes of the incident
Draft a financial planning and forecasting in the business : Draft a Financial Planning and Forecasting in the business (or accounting) setting/context. NO PLAGIA.
Accepting b but the irr is an invalid method : Project B pays you $550 today, and requires that you pay out $210 at the end of each of the next 4 years (t = 1, 2, 3, and 4).
Calculate the net present value : A US Multinational is considering a European investment opportunity. The size and timing of the after-tax cash flows are as follows: Initial investment required
Current price of a share of macinyost industries stock : Macinyost Industries just paid a $2 dividend yesterday. Analysts believe dividends will Increase by 20% next year, 10% the following year, and 5% thereafter.
How much would the roe have changed : Last year, Rennie Industries had sales of $464,000, assets of $245,000 (which equals total invested capital), a profit margin of 5.3%, and an equity multiplier
How would you incorporate business risk : How would you incorporate business risk in your analysis of these projects?
Approvals of capital budget proposals : What are some various ways department managers can get approvals of their Capital budget proposals? What are some action steps they can take to ensure they prep

Reviews

Write a Review

Finance Basics Questions & Answers

  Explain why mortgage defaults during the credit crisis

Explain why mortgage defaults during the credit crisis in 2008 and 2009 adversely affected financial institutions that did not originate the mortgages

  Generate in annual cash flows

If Brown's cost of capital is 8%, how much would the second project have to generate in annual cash flows to have the same NPV as the first project.

  Determining the weighted average cost of capital

Using free cash ?ow computed in Question 1 and the weighted average cost of capital computed in Question 2, estimate BrandCo's enterprise value using the growing-perpetuity formula. Assume free cash ?ow grows at 5 percent. Describe your answer.( 1..

  Define diversification and its necessity in risk management

Define diversification and its necessity in risk management

  What is highfield profit margin

Highfield Corporation has assets of $2,500, sales of $2,960, operating costs of $2,475, and $500 of total current liabilities consisting of $300 of accruals.

  The firm pays out half of its growth in dividends

Today's dividend is $10. Next year dividend will Expected rate of return in the market is 15% and the firm's growth rate is 3%. The firm pays out half of its growth in dividends.

  Types of skeletal muscle fibers

Watch "Types of Skeletal Muscle Fibers," then pick your favorite animal and list which type of skeletal muscle fiber makes up the majority of their muscle

  Discuss the role that your stage in life plays

Options in Asset Allocation. "There is a right way and a wrong way to use stock options in asset allocation." Evaluate this statement.

  What is the purpose of feasibility analysis

What is the purpose of feasibility analysis? What information is desired from such an analysis?

  What is the total depreciation expense allowed by the irs

What is the total depreciation expense allowed by the IRS for all three pieces of equipment for tax years 2028

  Buffet bid for media general newspapers case

If you are a current lender to MEG, would you refinance the 225 million term loan that is coming due? Would you refinance the term loan if you are a new lender?

  Calculate the firm''s estimated free cash flow

Calculate the firm's estimated free cash flow

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd