What is the NPV of the project

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Question - Gorbochevsky Equipment has an investment opportunity in Europe. The project costs EUR 12 million and is expected to produce cash flows of EUR 1.8 million in Year 1, EUR 2.6 million in Year 2, and EUR 3.5 million in Year 3. The current spot exchange rate is $1.36/EUR; the current risk-free rate in Canada is 2.3%, compared to that in Europe of 1.8%. The appropriate discount rate for the project is estimated to be 13%, the Canadian cost of capital for the company. In addition, the subsidiary can be sold at the end of three years for an estimated EUR 8.9 million. What is the NPV of the project?

Reference no: EM133042240

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