You Are Considering a Project in Norway with an Initial

question 35

Multiple Choice

You are considering a project in Norway with an initial cost of NKr135,000.The project is expected to return a one-time payment of NKr200,000 at the end of Year 5.Assume the risk-free rate of return is 2.6 percent in the U.S.and 3.1 percent in Norway.Assume the inflation rate is 1.6 percent in the U.S.and 2.3 percent in Norway.Lastly,assume the current exchange rate is $1 = NKr7.9271.Approximately how much will the payment at the end of 5 Years be worth in U.S.dollars?

• A)$24,609
• B)$24,108
• C)$26,472
• D)$25,870
• E)$26,006

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Definitions:

Partner Capital

The amount of money and resources contributed by partners in a partnership that is allocated to their individual capital accounts.

Capital Accounts

Ledger accounts that show the investment amounts of owners or shareholders in a company.

Loss On Realization

occurs when the proceeds from selling an asset or settling a liability are less than the carrying amount on the books.

Noncash Assets

Assets that cannot be easily converted into cash, such as real estate, equipment, and investments.