Use the Information for the Question(s)below

question 27

Multiple Choice

Use the information for the question(s) below.
You are a U.S.investor who is trying to calculate the present value of £5 million cash inflow that will occur one year in the future.The spot exchange rate is S = $1.8839/£ and the forward rate is F1 = $1.8862/£.The appropriate dollar discount rate for this cash flow is 5.32% and the appropriate £ discount rate is 5.24%.
-The present value of the £5 million cash inflow computed by first converting into dollars and then discounting is closest to:

• A)$8,950,495.
• B)$8,954,615.
• C)$8,943,695.
• D)$8,961,420.

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Definitions:

Adjusting Entry

Accounting entries recorded at the conclusion of a financial period for the purpose of assigning revenues and expenses to the time frame in which they were actually incurred.

Accounting Equation

The fundamental equation of double-entry bookkeeping: Assets = Liabilities + Equity.

Note Receivable

A written promise to pay a specified amount of money, with interest, by a certain date.

Adjusting Entry

An accounting journal entry made at the end of an accounting period to allocate income and expenditure to the correct period.