A Canadian fiRm Is Considering Purchasing a Subsidiary in Great

question 280

Multiple Choice

A Canadian firm is considering purchasing a subsidiary in Great Britain. The subsidiary will cost £16 million and will generate cash inflows of £7.6 million per year at the end of each of the next three
Years. After that, the company will be worthless. The current exchange rate is £0.83 British pounds
Per $1. The Canadian inflation rate is expected to be 4% over this period. The current risk-free rate
Of interest in Canada is 5% and the risk-free rate in Great Britain is 8%.[LINE][LINE]What is the NPV
In dollars of this project using the home currency approach?

• A) $294,405
• B) $489,269
• C) $524,963
• D) $631,896
• E) $832,095

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Definitions:

Trait-based Conception

A perspective that views personality as comprised of enduring traits, which are consistent patterns of thoughts, feelings, or behaviors across different situations.

Neuroticism

Neuroticism is a personality trait characterized by the tendency to experience negative emotions such as anxiety, anger, or depression more frequently and intensely than others.

Emotional Stability

A personality trait signifying the extent to which an individual's mood and emotions remain consistent and do not fluctuate dramatically.

Big Five

Five crucial dimensions of personality determined through factor analyses of trait terms: extraversion, neuroticism (or emotional instability), agreeableness, conscientiousness, and openness to experience.