Evaluating projects that involve foreign investment

Assignment Help Financial Management

Reference no: EM131998150

Your company has two divisions, one operating in the United States and one operating in Europe. Each division was started with an initial investment of $1 million. The accounting for the U.S. company is stated in dollars ($), while the accounting for the European company is stated in euros (D). Based upon the exchange rates at the time of the investment, the $1 million invested in Europe was equal to D800,000. Both companies earned 10% on investment in two recent years. The average exchange rate ($ per D) was 1.50 in the first year and 1.20 in the second year. If the profits were expressed in $, what was the return for the combined operations in these two years? Discuss the implications of this result for evaluating projects that involve foreign investment.

Reference no: EM131998150

Questions Cloud

Does the wacc contain profit component : Compare and contrast the WACC to this basic equation. Does the WACC contain a profit component?

Net working capital will not require flotation costs : Calculate the project’s initial Time 0 cash flow, taking into account all side effects. Assume that the net working capital will not require flotation costs.

What is your advice to the city manager : You are the newly appointed Director of Community Services for your community that is designated as a Sanctuary City and are responsible for administering.

Develop the global perspective of your managers : Describe methods you can use to develop the global perspective of your managers besides sending them to another country to develop their global competency.

Evaluating projects that involve foreign investment : Discuss the implications of this result for evaluating projects that involve foreign investment.

Break-even level of earnings before interest and taxes : What is the break-even level of earnings before interest and taxes (EBIT) between these two options?

Annual dividend in equal quarterly installments : Now suppose the company in (a) actually pays its annual dividend in equal quarterly installments;

Tex home-style steakhouse executive summary : This is an investment opportunity to be an owner of a new restaurant to be located in a new high-rise marketplace in a major metropolitan city

How long will it take to pay off the mortgage : With this? plan, how long will it take to pay off the mortgage if the EAR of the loan is? unchanged?

User Account

All Pages