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

question 185

Multiple Choice

You are analyzing a project with an initial cost of $\le$ 80,000. The project is expected to return $\le$ 10,000 the first year, $\le$ 40,000 the second year and $\le$ 50,000 the third and final year. The current spot rate is $\le$ .56. The nominal risk-free return is 5 % in the U.K. and 7 % in Canada. The return relevant to the project is 8 % in the U.K. and 9.25 % in Canada. Assume that uncovered interest rate parity exists. What is the net present value of this project in dollars?

• A) $7,787
• B) $8,002
• C) $8,312
• D) $8,511
• E) $8,885

---

Definitions:

PQ

The product of price (P) and quantity (Q), often used in economics to calculate total revenue or expenditure.

P

Typically refers to "Price" in economic models, representing the monetary value assigned to a good or service in the market.

V

Typically stands for Velocity in economic contexts, referring to the rate at which money circulates in the economy.

Monetary Policy

The process by which a central bank, like the Federal Reserve, controls the supply of money, often targeting an inflation rate or interest rate to ensure economic stability and growth.