You Are Analyzing a Very Low-Risk Project with an Initial

question 16

Multiple Choice

You are analyzing a very low-risk project with an initial cost of £120,000. The project is expected to return £40,000 the first year,£50,000 the second year and £60,000 the third and final year. The current spot rate is £.54. The nominal return relevant to the project is 4 percent in the U.K. and 3 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) $33,232
• B) $34,040
• C) $34,067
• D) $34,422
• E) $35,009

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Definitions:

Owner

An Owner is the individual or entity that legally holds the rights to possess, use, and dispose of property, assets, or a business.