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What is the break even salvage value in USD

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Question - Petrus Company has a unique opportunity to invest in a two-year project in Australia. The project is expected to generate one million Australian dollars (A$) in the first year and A$ 2 million in the second year. Petrus would have to invest $1,.5 million in the project. Petrus has determined that the cost of capital for similar projects is 14%. What is the break even salvage value in USD at the end of this project life (2nd year), if the future spot rates of the Australian dollar for the two years are expected to be $.55 and $.60, respectively?

a. $2.04 million

b. $1.22 million

c. $0.122 million

d. none of the above

Reference no: EM132780921

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