You Have an Investment Opportunity in Germany That Requires an Investment

question 21

Multiple Choice

You have an investment opportunity in Germany that requires an investment of $250,000 today and will produce a cash flow of €208,650 in one year with no risk.Suppose the risk-free rate of interest in Germany is 6% and the current competitive exchange rate is €0.78 to $1.00.What is the net present value (NPV) of this project? Would you take the project?

• A)NPV = 0; No
• B)NPV = 2358; No
• C)NPV = 2358; Yes
• D)NPV = 13,650; Yes
• E)NPV = $36,225; Yes

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