You Have an Investment Opportunity in Germany That Requires an Investment

question 47

Multiple Choice

You have an investment opportunity in Germany that requires an investment of $250,100 today and will produce a cash flow of €208,650 in one year with no risk.Suppose the risk-free rate of interest in Germany is 7% and the current competitive exchange rate is €0.78 to $1.00.What is the NPV of this project? Would you take the project?

• A)NPV = -$100;No
• B)NPV = $100;Yes
• C)NPV = $2358;Yes
• D)NPV = $3650;Yes

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Definitions:

R-Squared Value

A numerical value indicating how much of the variability in a dependent variable can be accounted for by an independent variable(s) within a regression analysis framework.

Observed Variation

The variance noticed in data due to different factors that distinguish one piece of data from another.

X1

Often used to denote the first variable or predictor variable in statistical models and equations.

X2

X2 often symbolizes an algebraic expression where a variable, x, is squared or raised to the power of 2, indicating a quadratic relationship.