A Canadian Firm Is Considering Purchasing a Subsidiary in Great $\le$

question 142

Multiple Choice

A Canadian firm is considering purchasing a subsidiary in Great Britain. The subsidiary will cost $\le$ 16 million and will generate cash inflows of $\le$ 7.6 million per year at the end of each of the next three years. After that, the company will be worthless. The current exchange rate is $\le$ 0.83 British pounds per $1. The Canadian inflation rate is expected to be 4% over this period. The current risk-free rate of interest in Canada is 5% and the risk-free rate in Great Britain is 8%.

If interest rate parity holds, what is the one-year forward rate for exchanging pounds for dollars?

• A) 0.830
• B) 0.854
• C) 0.863
• D) 0.881
• E) 0.907

Understand the role of mood and reciprocal expectations in compliance behavior.

Evaluate the effects of situational visibility on obedience to authority.

Examine factors that affect interpersonal attraction and relationship dynamics.

Understand the concept of psychological phenomena in social settings.

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Definitions:

Means Of Production

The physical, non-human inputs used for the production of economic value, such as factories, machines, and tools.

Circular Flow Model

Goods and services flow from business firms to households in exchange for consumer expenditures, while resources flow from households to business firms in exchange for resource payments.

Supply Products

The activity of making goods available to consumers, often involving manufacturing, distribution, and sale processes.

Demand Resources

The various inputs or factors that contribute to the demand side of the economy, influencing the quantity of goods and services demanded.