Crum Industries Is a Paper Manufacturing Company Based in the United

question 53

Multiple Choice

Crum Industries is a paper manufacturing company based in the United States.The CEO of the company Hannah Monstzka is considering an investment in Canada to take advantage of Canadian government subsidies.The investment will have the following cash flows: Initial cost = C$-2,000,000,Year 1 = C$1,250,000,Year 2 = C$1,000,000,Year 3 = C$750,000.Monstzka plans on hedging the cash flows using forward contracts throughout the life of the project.The risk-free rate of interest in Canada is 5% and the risk-free rate of interest in the U.S.is 4%.Currently the spot rate is $0.7134/C$ and the project should be discounted at a U.S.adjusted rate of 9%.Assume Monstzka will be able to convert the Canadian dollar cash flows into U.S.dollars at the implied forward rates when they are received.What is the NPV of the project in U.S.dollars?

• A) $374,071
• B) $567,606
• C) $404,930
• D) $393,465

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Definitions:

Leadership Substitute

Alternatives to traditional leadership that can fulfill the role of guiding or influencing a group, such as technology or organizational structures.

Organizational Politics

Activities within an organization aimed at improving someone's status or position, often through means other than merit or performance.

Long Hours

Extensive work periods that exceed the standard workday or workweek, often due to high job demands.

Overtime Pay

Compensation received for hours worked in excess of the standard working hours, typically at a higher pay rate than regular hours.