Lakonishok equipment has an investment opportunity in

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Reference no: EM13351957

Lakonishok Equipment has an investment opportunity in Europe. The project costs €15 million and is expected to create cash flows of €2.9 million in Year 1, €3.5 million in Year 2, and €4.0 million in Year 3. The present spot exchange rate is $1.44/€; the present risk-free rate in the United States is 3.0 percent, compared to that in Europe of 2.5 percent. The suitable discount rate for the project is estimated to be 12 percent, the U.S. cost of capital for the company. In addition, the subsidiary will be sold at the end of three years for an estimated €9.9 million.

Evaluate the NPV of the project?

Reference no: EM13351957

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