What is the npv of the project for company x

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Problem 1: Company X has an investment opportunity in Europe. The project costs € 42,000,000 and is expected to produce cash flows of €26,000,000 in Year 1, €23,000,000 in Year 2, and€ 13,000,000in Year 3. The current spot exchange rate is $2.75 /€ and the current risk-free rate in the United States is 4%, compared to that in Europe of 10.5%. The appropriate discount rate for the project is estimated to be 11%, the U.S. cost of capital for the company. In addition, the subsidiary can be sold at the end of three years for an estimated€ 13,750,000. What is the NPV of the project? Use the Home Currency approach to determine the NPV.

Reference no: EM132889168

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