You Are Analyzing a Project with an Initial Cost Of \le

question 138

Multiple Choice

You are analyzing a project with an initial cost of $\le$ 150,000. The project is expected to return $\le$ 25,000 the first year, $\le$ 55,000 the second year and $\le$ 110,000 the third and final year. The current spot rate is $\le$ 0.5086. The nominal risk-free return is six % in the U.K. and 6.5 % in the U.S. The return relevant to the project is 12 % in the U.S. Assume that uncovered interest rate parity exists. What is the net present value of this project in U.S. dollars?

• A) -$8,211
• B) -$7,465
• C) $8,505
• D) $8,730
• E) $8,947

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