A Canadian Firm Is Considering Purchasing a Subsidiary in Great $\le$

A Canadian firm is considering purchasing a subsidiary in Great Britain. The subsidiary will cost $\le$ 16 million and will generate cash inflows of $\le$ 7.6 million per year at the end of each of the next three years. After that, the company will be worthless. The current exchange rate is $\le$ 0.83 British pounds per $1. The Canadian inflation rate is expected to be 4% over this period. The current risk-free rate of interest in Canada is 5% and the risk-free rate in Great Britain is 8%.

What is the approximate rate of inflation in Great Britain?

A) 2%
B) 5%
C) 7%
D) 8%
E) 10%