You want to invest in a project in Australia. The project has an initial cost of A$2.3 million and is expected to produce cash inﬂows of A$950,000 a year for 3 years. The project will be worthless
After the ﬁrst 3 years. The expected inﬂation rate in Australia is 5 percent while it is only 2 percent
In Canada. The applicable interest rate in Australia is 9 percent. The current spot rate is A$1 =
C$)86. What is the net present value of this project in Australian dollars using the foreign currency
Approach?

Question

Quizplus · Accepted Answer

The Answer of You want to invest in a project in Australia. The project has an initial cost of A$2.3 million and is expected to produce cash inﬂows of A$950,000 a year for 3 years. The project will be worthless
After the ﬁrst 3 years. The expected inﬂation rate in Australia is 5 percent while it is only 2 percent
In Canada. The applicable interest rate in Australia is 9 percent. The current spot rate is A$1 =
C$)86. What is the net present value of this project in Australian dollars using the foreign currency
Approach?

You Want to Invest in a Project in Australia