You want to invest in a project in Canada. The project has an initial cost of C$1.6 million and is expected to produce cash inﬂows of C$750,000 a year for 3 years. The project will be worthless
After the ﬁrst 3 years. The expected inﬂation rate in Canada is 5 percent while it is only 3.5 percent
In the U.S. The applicable interest rate for the project in Canada is 12 percent. The current spot rate
Is C$1 = $0.8637. What is the net present value of this project in Canadian dollars using the foreign
Currency approach?

Question

Quizplus · Accepted Answer

The Answer of You want to invest in a project in Canada. The project has an initial cost of C$1.6 million and is expected to produce cash inﬂows of C$750,000 a year for 3 years. The project will be worthless
After the ﬁrst 3 years. The expected inﬂation rate in Canada is 5 percent while it is only 3.5 percent
In the U.S. The applicable interest rate for the project in Canada is 12 percent. The current spot rate
Is C$1 = $0.8637. What is the net present value of this project in Canadian dollars using the foreign
Currency approach?

You Want to Invest in a Project in Canada