Question 1

Consider the following international investment opportunity:  The current exchange rate is $1.60 = €1.00. The inflation rate in the U.S. is 3 percent and in the euro zone 2 percent. The appropriate cost of capital to a U.S.-based firm for a domestic project of this risk is 8 percent.
-What is the dollar-denominated IRR of this project?

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Question 2

Find the dollar cash flows to compute the dollar-denominated NPV of this project.
Please note that your answer is worth ZERO POINTS if it does not contain currency symbols.

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Question 3

Consider the following international investment opportunity. It involves a gold mine that can be opened at a cost, then produces a positive cash flow, but then requires environmental clean up:  The current exchange rate is $1.60 = €1.00. The inflation rate in the U.S. is 6 percent and in the euro zone 2 percent. The appropriate cost of capital to a U.S.-based firm for a domestic project of this risk is 8 percent.
-Find the euro-zone cost of capital to compute the dollar-denominated NPV of this project.

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Question 4

Find the dollar cash flows to compute the dollar-denominated NPV of this project.
Your answer is worth ZERO POINTS if it does not contain currency symbols such as $,£,€,¥!

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Question 5

Consider the following international investment opportunity:  The current exchange rate is $1.60 = €1.00. The inflation rate in the U.S. is 3 percent and in the euro zone 2 percent. The appropriate cost of capital to a U.S.-based firm for a domestic project of this risk is 8 percent.
-What is the euro-denominated IRR of this project?

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Question 6

Repeat the above project analysis assuming that the Irish firm could replicate the project in Ireland.(i.e.cash flow out the project in Ireland and find break-even price (in €),quantity,NPV,IRR (in euro not dollars).

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Question 7

What is the dollar-denominated IRR of this project?

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Question 8

A French firm is considering a one-year investment in the United Kingdom with a pound-denominated rate of return of iS1U1B1£S1U1B0 = 15%. The firm's local cost of capital is iS1U1B1€S1U1B0 = 10% The project costs £1,000 and will return £1,150 at the end of one year. The current exchange rate is €2.00 = £1.00 Suppose that the bank of England is considering either tightening or loosening its monetary policy. It is widely believed that in one year there are only two possibilities: Following revaluation, the exchange rate is expected to remain steady for at least another year. -Find the IRR in euro for the French firm if they wait one year to undertake the project after the exchange rate rises to S₁(€|£)= €2.20 per £.

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Question 9

Consider the following international investment opportunity:  The current exchange rate is $1.60 = €1.00. The inflation rate in the U.S. is 3 percent and in the euro zone 2 percent. The appropriate cost of capital to a U.S.-based firm for a domestic project of this risk is 8 percent.
-Find the euro-zone cost of capital to compute the dollar-denominated NPV of this project.

Accepted Answer

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Question 10

What is the euro-denominated IRR of this project?

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Question 11

What is the NPV of the U.S.-based project to the Irish firm?

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Question 12

A French firm is considering a one-year investment in the United Kingdom with a pound-denominated rate of return of iS1U1B1£S1U1B0 = 15%. The firm's local cost of capital is iS1U1B1€S1U1B0 = 10% The project costs £1,000 and will return £1,150 at the end of one year. The current exchange rate is €2.00 = £1.00 Suppose that the bank of England is considering either tightening or loosening its monetary policy. It is widely believed that in one year there are only two possibilities: Following revaluation, the exchange rate is expected to remain steady for at least another year. -Find the ex post IRR in euro for the French firm if they undertake the project today and then the exchange rate rises to S₁(€|£)= €2.20 per £.

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Question 13

A French firm is considering a one-year investment in the United Kingdom with a pound-denominated rate of return of iS1U1B1£S1U1B0 = 15%. The firm's local cost of capital is iS1U1B1€S1U1B0 = 10% The project costs £1,000 and will return £1,150 at the end of one year. The current exchange rate is €2.00 = £1.00 Suppose that the bank of England is considering either tightening or loosening its monetary policy. It is widely believed that in one year there are only two possibilities: Following revaluation, the exchange rate is expected to remain steady for at least another year. -Find the ex post IRR in euro for the French firm if they undertake the project today and then the exchange rate falls to S₁(€|£)= €1.80 per £.

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Question 14

Find the break-even price (in dollars)and break-even quantity for the U.S.project.

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Question 15

What is the euro-denominated IRR of this project?

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Question 16

What is the euro-denominated IRR?

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Question 17

What is the dollar-denominated IRR?

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Question 18

What is the dollar-denominated IRR of this project?

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Question 19

Consider the following international investment opportunity:  The current exchange rate is $1.60 = €1.00. The inflation rate in the U.S. is 3 percent and in the euro zone 2 percent. The appropriate cost of capital to a U.S.-based firm for a domestic project of this risk is 8 percent.
-Find the dollar cash flows to compute the dollar-denominated NPV of this project.

Accepted Answer

The answer of Consider the following international investment opportunity: ...

Question 20

Consider the following international investment opportunity. It involves a gold mine that can be opened at a cost, then produces a positive cash flow, but then requires environmental clean up:  The current exchange rate is $1.55 = €1.00. The inflation rate in the U.S. is 6 percent and in the euro zone 2 percent. The appropriate cost of capital to a U.S.-based firm for a domestic project of this risk is 8 percent.
-Find the euro-zone cost of capital to compute the dollar-denominated NPV of this project.

Accepted Answer

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Quiz 18: International Capital Budgeting

Find the dollar cash flows to compute the dollar-denominated NPV of this project. Please note that your answer is worth ZERO POINTS if it does not contain currency symbols.

Find the dollar cash flows to compute the dollar-denominated NPV of this project. Your answer is worth ZERO POINTS if it does not contain currency symbols such as $,£,€,¥!

Repeat the above project analysis assuming that the Irish firm could replicate the project in Ireland.(i.e.cash flow out the project in Ireland and find break-even price (in €),quantity,NPV,IRR (in euro not dollars).

What is the dollar-denominated IRR of this project?

What is the euro-denominated IRR of this project?

What is the NPV of the U.S.-based project to the Irish firm?

Find the break-even price (in dollars)and break-even quantity for the U.S.project.

What is the euro-denominated IRR of this project?

What is the euro-denominated IRR?

What is the dollar-denominated IRR?

What is the dollar-denominated IRR of this project?