What is the npv

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Reference no: EM132051985

Pulse is considering acquisition of a company in London. Its initial investment would be $3.9 million. It will reinvest all the earnings in the company. It expects that at the end of 8 years, it will sell the company for 17 million euros after capital gains taxes are paid. The spot rate of the euro is $1.13 and is used as the forecast of the euro in the future years. Pulse has no plans to hedge its exposure to exchange rate risk. The annualized U.S. risk-free interest rate is .05 regardless of the maturity of the debt, and the annualized risk-free interest rate on euros is .07, regardless of the maturity of debt. Assume that interest rate parity exists. Pulse's cost of capital is 0.15. It plans to use cash to make the acquisition. What is the NPV?

Reference no: EM132051985

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