You Are Analyzing a Project with an Initial Cost of £150,000

question 13

Multiple Choice

You are analyzing a project with an initial cost of £150,000. The project is expected to return
£25,000 the first year, £55,000 the second year and £110,000 the third and final year. The current
spot rate is £0.5086. The nominal risk-free return is six percent in the U.K. and 6.5 percent in the U.S. The return relevant to the project is 12 percent in the U.S. Assume that uncovered interest rate parity exists. What is the net present value of this project in U.S. dollars?

• A) -$8,211
• B) -$7,465
• C) $8,505
• D) $8,730
• E) $8,947

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Definitions:

Team Viability

The capacity of a team to continue working effectively over time, maintaining the potential for future success.

Long-Run Test

A long-run test is an evaluation conducted over an extended period of time to assess the sustainability, reliability, or performance of a product, service, or system under prolonged use.

Performance Effectiveness

A measurement of how well an individual or organization achieves its goals.

Operating Systems

Software that manages computer hardware and software resources, providing common services for computer programs.