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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Definitions:

Negligent Infliction

A tort action for causing harm to another by failing to use reasonable care, resulting in psychological or physical injury.

Emotional Distress

A legal term for the psychological impact experienced by an individual due to another's action, which can sometimes lead to legal action for damages.

Substantial Factor Test

A legal standard used to determine causation, examining whether an action was a significant contributor to an event or injury.

Ultrahazardous Activity

involves actions or operations that inherently pose significant risk of causing substantial harm, for which those involved may be held strictly liable for any damages.