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What is the euro-dominated npv of this project

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Question - Consider the following international investment opportunity:

Year 0

Year 1

Year 2

Year 3

-€50,000

€15,000

€15,000

€20,000

The current exchange rate is $1.60 = €1.00. The inflation rate in the U.S. is 3% and in the euro zone 2%. The appropriate cost of capital to a U.S.-based firm for a domestic project of this risk is 8%.

Required -

a. Find the euro-zone cost of capital for this international project.

b. What is the euro-dominated NPV of this project?

c. What is the dollar-denominated NPV of this project?

Reference no: EM133004299

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