Equipment has an investment opportunity

Assignment Help Financial Management

Reference no: EM131336236

Lakonishok Equipment has an investment opportunity in Europe. The project costs €15 million and is expected to produce cash flows of €2.8 million in Year 1, €3.4 million in Year 2, and €3.9 million in Year 3. The current spot exchange rate is $1.43 / €; and the current risk-free rate in the United States is 2.9 percent, compared to that in Europe of 2.2 percent. The appropriate discount rate for the project is estimated to be 11 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 €9.8 million. What is the NPV of the project in U.S. dollars? (Do not round intermediate calculations and round your final answer to 2 decimal places (e.g., 32.16.). Enter your answer in dollars, not in millions (e.g., 1,234,567).)

Reference no: EM131336236

Questions Cloud

How does this leader use politics and networking : Politics, Networking, and Negotiation: How does this leader use politics, networking, or negotiation to influence people? Use at least one source with an example from an online library to support your rationale

Discuss about the case given below : Numerous emails have been sitting in the HR Director's in-box for two months. Smith is highly agitated that none of his have been responded to. Now that you are hired, he has asked you to address the emails immediately.

Analyze the leader behaviors : Lastly, analyze the leader's behaviors within the group dynamics to identify if the behaviors lead to any clues about the leader's potential mental models as he or she interacted with the group. Explain

Who leading the leading health indicators : Information available at the following links will be used in the preparation of this assignment: Who's Leading the Leading Health Indicators? Review the most recent state Summary Report

Equipment has an investment opportunity : Lakonishok Equipment has an investment opportunity in Europe. The project costs €15 million and is expected to produce cash flows of €2.8 million in Year 1, €3.4 million in Year 2, and €3.9 million in Year 3. The current spot exchange rate is $1.43 /..

Analyzing proposed expansion project : Casper's is analyzing a proposed expansion project that is much riskier than the firm's current operations. Thus, the project will be assigned a discount rate equal to the firm's cost of capital plus 2.5 percent. The proposed project has an initial c..

What are the bondholders contractual claims to payment : Time Watch Co. has $79 million in earnings and is considering paying $8.90 million in interest to bondholders and $6.95 million to preferred stockholders in dividends. Use Table 17-4. What are the bondholders contractual claims to payment?

Major component of health plans? : Why do you believe that funding preventive health care services has taken so long to become a major component of health plans? What do you think will need to happen to change the prevailing mindset of funding health care services reactively versus p..

What is the firms weighted average cost of capital : Acetate, Inc., has equity with a market value of $22 million and debt with a market value of $11 million. The cost of debt is 8 percent per year. Treasury bills that mature in one year yield 4 percent per year, and the expected return on the market p..

User Account

All Pages