You Want to Invest in a Riskless Project in Sweden

question 24

Multiple Choice

You want to invest in a riskless project in Sweden.The project has an initial cost of SKr3.8million and is expected to produce cash inflows of SKr1.75 million a year for three years.The project will be worthless after three years.The expected inflation rate in Sweden is 3.2 percent while it is 4.3 percent in the U.S.A risk-free security is paying 5.5 percent in the U.S.The current spot rate is $1 = SKr7.7274.What is the net present value of this project in Swedish kroner? Assume the international Fisher effect applies.

• A)SKr587,561
• B)SKr701,458
• C)SKr823,333
• D)SKr958,029
• E)SKr1,019,774

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