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Compute what is the denominated npv of the project

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Problem 1: An Italian firm is considering investing its line of coin-operated cappuccino machines in the U.K. This project requires an initial investment of £100,000, and generates £25,000 and £100,000 in the following 2 years, respectively. The cost of capital in the euro zone is i€ =10%. The expected inflation rate over the next two years in the U.K. is 3% per year and 2% per year in the euro zone. The spot exchange rate is €1.5652 =£1.00. What is the €-denominated NPV of this project?

A. €3,554.29
B. €7,223.14
C. €2,270.79
D. €5563.17

Reference no: EM132763193

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