A Canadian

question 14

Multiple Choice

A Canadian.firm acquires a British firm that will generate cash flows of 20,000 pounds next year and these cash flows will grow at 4% a year.If the British WACC is 9% and the spot exchange rate is 1.8 CAD/GBP,what is the present value (PV) of the cash flows from this acquisition to domestic shareholders?

• A)$633,333
• B)$654,876
• C)$691,543
• D)$720,000
• E)$704,300

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Definitions:

Nonmanufacturing Costs

Expenses not related to the production of goods, such as selling, administrative, and financial costs.

Work in Process

Stock that consists of items that are in the midst of production but have not yet reached completion.

Job-order Costing

A cost accounting system that assigns manufacturing costs to an individual product or batches of products, ideal for customized orders.

Work in Process

Inventory that includes goods partially completed but not yet ready for sale, situated between raw materials and finished goods.