What is the forward exchange rate

Assignment Help Financial Management

Reference no: EM132061887

International Machinery Company (IMC) is a Swedish multinational manufacturing company. Currently, IMC's financial planners are considering undertaking a 1-year project in the United States. The project's expected dollar-denominated cash flows consist of an initial investment of $2,550 and a cash inflow the following year of $4,000. IMC estimates that its risk-adjusted cost of capital is 18%. Currently, 1 U.S. dollar will buy 7.1 Swedish kronas. In addition, 1-year risk-free securities in the United States are yielding 5%, while similar securities in Sweden are yielding 4%. a. If the interest parity holds, what is the forward exchange rate of Swedish krona per U.S. dollar? Round your answer to 2 decimal places. Do not round intermediate calculations. Swedish krona per U.S. dollar b. If IMC undertakes the project, what is the net present value and rate of return of the project for IMC in home currency? Round your answer to 2 decimal places. Do not round intermediate calculations. NPV: Swedish kronas Rate of return: %

Reference no: EM132061887

Questions Cloud

Determining the population at risk for heart disease : Describe the frequency in the population by determining the population at risk for heart disease by gender and age.

How does functionalism differs from conflict theory : How does functionalism differs from conflict theory. And how does the two theories would differ in their understanding of inequality?

Describe the trends in the non-alcoholic beverage industry : Describe the trends in the non-alcoholic beverage industry, especially the specific type of beverage category you have chosen.

Why does gender pay gap exist in this country : Why does gender pay gap exist in this country? what are the problems associated with having this gap?

What is the forward exchange rate : If the interest parity holds, what is the forward exchange rate of Swedish krona per U.S. dollar?

Do marketers create product shortages to drive up demand : Do marketers and companies sometimes create product shortages to drive up demand? What benefit is it to artificially create a shortage?

University of pennsylvania : Please list all of the facts which make university of pennsylvania esp wharton school special and different from other unis.

Kids self confidence in future : In conclusion kids responsibility by contributing some money for parent to pay rent, is helpful for relief from parents huge saddle household expense

Reasons demonstrate that parents are the family : Three reasons demonstrate that parents are the family that should charge their kids. The main reason is that kids can learn their future

User Account

All Pages