You Are Analyzing a Project with an Initial Cost of £50,000

question 76

Multiple Choice

You are analyzing a project with an initial cost of £50,000. The project is expected to return £10,000 the first year, £35,000 the second year and £40,000 the third and final year. The current spot rate is
£0) 5086. The nominal return relevant to the project is 11 percent in the U.S. The nominal risk-free
Rate in the U.S. is three percent while it is five percent in the U.K. Assume that uncovered interest
Rate parity exists. What is the net present value of this project in U.S. dollars?

• A) $23,611
• B) $25,408
• C) $26,930
• D) $29,639
• E) $30,796

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Definitions:

Problem-solving Ability

The capacity to find solutions for difficult or complex issues.

Literacy

The ability to read and write at a level adequate for communication or comprehension.

Economic Growth

The increase in the amount of goods and services produced by an economy over a period of time.

Declining Savings

A situation where the amount of money saved by individuals or entities decreases over time.