An Australian Firm Is Evaluating a Proposal to Build a New

question 20

Multiple Choice

An Australian firm is evaluating a proposal to build a new plant in the United States. The expected cash flows in $US (in millions) are as follows: Year 0, −100; Year 1, 40; Year 2, 50; Year 3, 65. The discount rate in $A is 10 percent, while the discount rate in $US is 12 percent and the spot rate is $US0.85/$A. Calculate the NPV in $A.

• A)+25.69
• B)−21.84
• C)+13.10
• D)+21.84

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Definitions:

Proportions

A statistical measure expressing the relationship of a part to the whole, typically represented as a fraction or percentage.

Rejection Region

The range of values in hypothesis testing outside of which the null hypothesis is rejected in favor of the alternative hypothesis.

Categorical Variables

Categorical variables are qualitative variables that can take on different categories, but which do not have a natural order or ranking.

Degrees Of Freedom

The number of independent values or quantities that can vary in the analysis without violating any constraints.