You Have Estimated the Cash Flows in Pesos from a Project

question 68

Multiple Choice

You have estimated the cash flows in pesos from a project in Switzerland and also the dollar-based cost of capital for the project.To compute the project NPV in dollars,you now need to compute the:

• A) current spot rate only.
• B) opportunity cost of capital measured in terms of the foreign currency.
• C) implied forward exchange rate for each year in which the project has cash flows.
• D) actual spot rates for each year in which the project has cash flows.

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Definitions:

Total Debt

The sum of all owed liabilities, both current and long-term, that a company must eventually pay back.

Cash Coverage Ratio

A financial metric that measures a company's ability to cover its debt obligations with its available cash and cash equivalents.

Times Interest Earned

A financial ratio that measures a company's ability to meet its debt obligations by comparing net income before interest and taxes to its interest expenses.

Depreciation Expense

The allocation of an asset's cost over its useful life, reflecting the decrease in value over time due to wear and tear or obsolescence.