A US Firm Acquires a British Firm That Will Generate Cash

question 29

Multiple Choice

A U.S. 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/pound, 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

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