You Want to Invest in a Project in Australia

question 233

Multiple Choice

You want to invest in a project in Australia. The project has an initial cost of A$2.3 million and is expected to produce cash inflows of A$950,000 a year for 3 years. The project will be worthless after the first 3 years. The expected inflation rate in Australia is 5 % while it is only 2 % in Canada. The applicable interest rate in Australia is 9 %. The current spot rate is A$1 = C$.86. What is the net present value of this project in Australian dollars using the foreign currency approach?

• A) A$101,361
• B) A$104,730
• C) A$111,008
• D) A$122,222
• E) A$126,321

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Definitions:

Vulva

Common name for the external genital organs of a female.

Progesterone

A steroid hormone released by the corpus luteum that stimulates the uterus to prepare for pregnancy.

Estrogen

A group of hormones critical for the development and functioning of female reproductive tissues and the regulation of the menstrual cycle.

Menstruation

The monthly shedding of the uterine lining in non-pregnant women, typically accompanied by bleeding, marking the start of the menstrual cycle.