You Want to Invest in a Riskless Project in Sweden

question 56

Multiple Choice

You want to invest in a riskless project in Sweden.The project has an initial cost of SKr2.1 million and is expected to produce cash inflows of SKr810,000 a year for 3 years.The project will be worthless after the first 3 years.The expected inflation rate in Sweden is 2% while it is 5% in the U.S.A risk-free security is paying 6 percent in the U.S.The current spot rate is $1 = SKr7.55.What is the net present value of this project in Swedish krona using the foreign currency approach? Assume that the international Fisher effect applies.

• A)SKr185,607
• B)SKr191,175
• C)SKr196,910
• D)SKr197,867
• E)SKr202,818

---

Definitions:

Functional Status

An individual's ability to perform normal daily activities required to meet basic needs, fulfill usual roles, and maintain health and well-being.

Culture

The shared values, customs, beliefs, and practices of a group of people that shape their way of life and social behaviors.

Piaget

Jean Piaget, a Swiss psychologist known for his pioneering work in child development, particularly his theory of cognitive development.

Preoperational

A stage in cognitive development, according to Piaget, where children are unable to perform operations and display egocentric thinking.