Use the Information for the Question(s) Below

question 46

Multiple Choice

Use the information for the question(s) below.
You are a U.S. investor who is trying to calculate the present value (PV) of £5 million cash inflow that will occur one year in the future. The spot exchange rate is S = $1.8839/£ and the forward rate is F₁ = $1.8862/£. The appropriate dollar discount rate for this cash flow is 5.32% and the appropriate £ discount rate is 5.24%.
-The present value (PV) of the £5 million cash inflow computed by first discounting the £s and then converting into dollars is closest to ________.

• A) $8,961,420
• B) $8,950,495
• C) $8,954,615
• D) $8,943,695

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Definitions:

Fixed Assets Turnover Ratio

Measures how effectively the firm uses its plant and equipment. It is the ratio of sales to net fixed assets.

Appraise

To appraise is to evaluate or estimate the nature, quality, ability, extent, or significance of something or someone, often used in the context of property or art valuation.

Proportion

A part of a whole expressed as a fraction or percentage, often used to compare quantities in terms of size or magnitude.

Quick Ratio

A liquidity measure that indicates a company's ability to cover its short-term liabilities with its most liquid assets.