An MNC Is Considering Establishing a Two-Year Project in New

question 53

Multiple Choice

An MNC is considering establishing a two-year project in New Zealand with a $30 million initial investment. The firm's cost of capital is 12 percent. The required rate of return on this project is 18 percent. The project is expected to generate cash flows of NZ$12 million in Year 1 and NZ$30 million in Year 2, excluding the salvage value. Assume no taxes and a stable exchange rate of $.60 per NZ$ over the next two years. All cash flows are remitted to the parent. What is the break-even salvage value?

• A) about NZ$11 million
• B) about NZ$15 million
• C) about NZ$31 million
• D) about NZ$37 million
• E) about NZ$25 million

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Definitions:

Hypnotized

Being hypnotized refers to a trance-like state of focused attention and heightened suggestibility, usually induced by a hypnotist.

Suggestibility

A measure of how susceptible a person is to influence by suggestions, often used in psychological contexts to explore how people can be influenced by others' ideas or misremember events.

Hypnotist

A person skilled in hypnosis, the practice of inducing a state of heightened focus, reduced peripheral awareness, and increased suggestibility.

Transcendental Meditation

A technique for detaching oneself from anxiety and promoting harmony and self-realization by meditation, repetition of a mantra, and other yogic practices.