You Want to Invest in a Riskless Project in Sweden

question 11

Multiple Choice

You want to invest in a riskless project in Sweden.The project has an initial cost of SKr2.1 million and is expected to produce cash inflows of SKr810,000 a year for 3 years.The project will be Worthless after the first 3 years.The expected inflation rate in Sweden is 2 percent while it is 5 Percent in the U.S.A risk-free security is paying 6 percent in the U.S.The current spot rate is $1 = SKr7.55.What is the net present value of this project in Swedish krona using the foreign currency Approach? Assume that the international Fisher effect applies.

• A)SKr185,607
• B)SKr191,175
• C)SKr196,910
• D)SKr197,867
• E)SKr202,818

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