A Canadian fiRm Is Considering Purchasing a Subsidiary in Great

question 45

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 cash
Inflow for year 3 in terms of Canadian dollars?

• A) $7.88 million
• B) $8.12 million
• C) $8.38 million
• D) $9.16 million

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Definitions:

Environmental Integrity

The maintenance of the world's physical, biological, and chemical environments to sustain ecosystem health and function.

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A system of vehicles such as buses and trains that operate at regular times on fixed routes and are available for use by the public.