An Australian Firm Is Evaluating a Proposal to Build a New

question 39

Multiple Choice

An Australian firm is evaluating a proposal to build a new plant in the United States. The expected cash flows in $US (in millions) are as follows: Year 0, −100; Year 1, 40; Year 2, 50; Year 3, 65. The discount rate in $A is 10 percent, while the discount rate in $US is 12 percent and the spot rate is $US0.60/$A. Calculate the NPV of the project in $US.

• A)+36.40
• B)−21.84
• C)+13.10
• D)+21.84

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Definitions:

Foolish Questions

Questions that might seem to lack understanding, insight, or relevance, but can sometimes lead to unexpected insights and creative solutions.

Logic

Logic is the systematic study of the form of valid inference, reasoning, and principles of correct reasoning.

Managerial Problem Solving

The process by which managers identify, analyze, and resolve problems that are impeding organizational performance.

Escalation Of Commitment

The phenomenon where people continue to invest time, money, or effort into a failing project due to their prior commitments rather than cut their losses.