XJ Company from the USA Is Evaluating a Proposal to Build

question 15

Multiple Choice

XJ Company from the USA is evaluating a proposal to build a new plant in the United Kingdom. The expected cash flows in pounds are as follows: Year 0, -50; Year 1, 25; Year 2,35; Year 3, 40. The discount rate in BP is 14% and the discount rate in the US$ is 12%. The spot rate is US$1.99/BP. Calculate the NPV in US$:

• A) +25.86
• B) +28.69
• C) +51.46
• D) None of the above

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Definitions:

Company Assets

Resources owned by a company that have economic value and can contribute to future profits, such as cash, inventory, and equipment.

Profitability

A measure of the efficiency of a company in generating profit relative to its revenue, costs, and investments.

Quick Ratio

A financial metric that measures a company's ability to cover its short-term liabilities with its most liquid assets, excluding inventory.

Current Liabilities

Short-term financial obligations due within one year or within the entity's operating cycle if longer.