You Are Analyzing a Project with an Initial Cost of £48,000.The

question 1

Multiple Choice

You are analyzing a project with an initial cost of £48,000.The project is expected to return £11,000 the first year,£36,000 the second year and £38,000 the third and final year.There is no salvage value.The current spot rate is £0.6211.The nominal return relevant to the project is 12 percent in the U.S.The nominal risk-free rate in the U.S.is 4 percent while it is 5 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)$25,938
• C)$26,930
• D)$29,639
• E)$30,796

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