You Want to Invest in a Project in Canada

question 94

Multiple Choice

You want to invest in a project in Canada. The project has an initial cost of C$1.2 million and is expected to produce cash inflows of C$600,000 a year for 3 years. The project will be worthless after the first 3 years. The expected inflation rate in Canada is 4 percent while it is only 3 percent in the U.S. The applicable interest rate in Canada is 8 percent. The current spot rate is C$1 = $.69. What is the net present value of this project in Canadian dollars using the foreign currency approach?

• A) C$335,974
• B) C$342,795
• C) C$346,258
• D) C$349,721
• E) C$356,750

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Definitions:

Strategy

The formulation of organizational objectives, scopes, and action plans for gaining advantage.

Objectives

Goals or outcomes that an organization or individual aims to achieve within a specified timeframe.

Strategic Planning

The process of defining an organization's strategy or direction, and making decisions on allocating its resources to pursue this strategy.

Organizational Performance

This measures how efficiently and effectively an organization achieves its goals and objectives.