What is the projects net present value

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Reference no: EM133326490

Case: Maine Corp. is considering setting up a project in France. The initial investment is $5,000,000 and the company expects to receive cash dividends over the coming three years. The first dividend, to be paid December 31st, 2017, is expected to be €650,000. The dividend is then expected to grow 7% per year over the following two years. At the end of the third year, Maine Corp. expects to sell the project for a terminal (salvage) value of €5,000,000. The current exchange rate (December 31st, 2016) is $1.15/€, while Maine Corp.'s weighted average cost of capital is 10%. If the euro is expected to depreciate by 3% per year against the dollar, what is the project's net present value (in dollars)?

Reference no: EM133326490

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