A US-Based Firm Is Planning to Make an Investment in Europe

question 79

Multiple Choice

A U.S.-based firm is planning to make an investment in Europe. The firm estimates that the project will generate cash flows of 100,000 euros after one year. If the one-year forward exchange rate is $1.35/euro and the dollar cost of capital is 10%, what is the present value (PV) of the project cash flows?

• A) $122,675
• B) $122,727
• C) $127,150
• D) $128,209

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Definitions:

Enzyme

Organic catalyst, usually a protein, that speeds a reaction in cells due to its particular shape.

Double Helix

Double spiral; describes the three-dimensional shape of DNA.

Deoxyribose Sugar

A five-carbon sugar molecule that is a component of DNA molecules.

Hydrogen Bonds

Weak bonds that occur when a hydrogen atom in one molecule is attracted to an electronegative atom in another molecule.