A USfirm Can Invest DM10 Million in Its German Subsidiary and and Receive

question 13

Essay

A U.S.firm can invest DM10 million in its German subsidiary and receive a return of DM4.3 million annually for 3 years.The spot rate is DM1.6/$(U.S.), the U.S.rate of inflation is expected to be 4% annually, and the German rate is expected to be 3% annually.If the appropriate risk-adjusted cost of capital in Dollars is 14%, does the project appear to have a positive NPV?

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Definitions:

Closed Primaries

Electoral contests limited to registered party members, preventing members of other parties from participating in the selection of that party's candidates.

Presidential Delegates

Selections made by a political party or candidate to represent them at their party's national convention, instrumental in choosing the party's presidential nominee.

Dockworker

An individual employed at a port or harbor to load, unload, secure, and transfer goods or materials between ships and dockside storage areas.