Proposed expansion of an existing subsidiary

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Reference no: EM131020168

You are evaluating a proposed expansion of an existing subsidiary located in Switzerland. The cost of the expansion would be Fr 15 million. The cash flows from the project would be Fr 4.1 million per year for the next five years. The dollar required return is 11 percent per year, and the current exchange rate is Fr 1.06. The going rate on Eurodollars is 4 percent per year. It is 3 percent per year on Swiss francs. a. Convert the projected franc flows into dollar flows and calculate the NPV. (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).) NPV $ b-1. What is the required return on franc flows? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).) Return on franc flows % b-2. What is the NPV of the project in Swiss francs? (Do not round intermediate calculations and round your final answer to 2 decimal places (e.g., 32.16). Enter your answer in francs, not in millions (e.g., 1,234,567).) NPV Fr b-3. What is the NPV in dollars if you convert the franc NPV to 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).) NPV $

Reference no: EM131020168

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Proposed expansion of an existing subsidiary : You are evaluating a proposed expansion of an existing subsidiary located in Switzerland. The cost of the expansion would be Fr 15 million. The cash flows from the project would be Fr 4.1 million per year for the next five years. What is the NPV in d..

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