You Want to Invest in a Project in Canada

question 94

Multiple Choice

You want to invest in a project in Canada. The project has an initial cost of C$1.2 million and is expected to produce cash inflows of C$600,000 a year for 3 years. The project will be worthless after the first 3 years. The expected inflation rate in Canada is 4 percent while it is only 3 percent in the U.S. The applicable interest rate in Canada is 8 percent. The current spot rate is C$1 = $.69. What is the net present value of this project in Canadian dollars using the foreign currency approach?

• A) C$335,974
• B) C$342,795
• C) C$346,258
• D) C$349,721
• E) C$356,750

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Definitions:

Superego

Part of the personality in Freudian psychoanalysis comprised of the internalized ideals and moral standards we acquire from parents and society.

Anal Retentive

Gaining pleasure from retaining the bowels.

Self

The individual's awareness of their own identity and personal characteristics, often including self-concept, self-esteem, and self-image.

Ego

In psychoanalytic theory, the part of the personality that mediates between the desires of the id, the rules of the superego, and the realities of the external world.