You Are Analyzing a Project with an Initial Cost of £45,000

question 119

Multiple Choice

You are analyzing a project with an initial cost of £45,000. The project is expected to return £8,000
the first year, £22,000 the second year and £20,000 the third and final year. The current spot rate is£.57. The nominal risk-free return is 5.5 percent in the U.K. and 4.5 percent in Canada. The return relevant to the project is 9 percent in the U.K. and 10.5 percent in Canada. Assume that uncovered Interest rate parity exists. What is the net present value of this project in Canadian dollars?

• A) -$10,144
• B) $1,206
• C) $11,418
• D) $13,711
• E) $16,009

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Definitions:

Mirror Neurons

Neurons that fire both when an individual acts and when the individual observes the same action performed by another, believed to play a role in understanding others' actions, intentions, and emotions.

Fusiform Gyrus

A region of the human brain located in the temporal and occipital lobes, implicated in various functions including face and object recognition.

Smiling Face

A facial expression featuring an upward curving of the mouth, often signaling happiness or friendliness.

False Consensus

A general tendency to assume that other people share our own attitudes, opinions, and preferences.