The spot exchange rate for the Thai bhat is 33.135 bhat to the dollar.The one year forward rate is 34.175.Cooper Inc.has undertaken a capital project in Bangkok that is expected to produce a cash flow of 17 087 500 bhat at the end of the first year.The company will discount cash flows at a rate of 14%.What is the present value of the first year cash flow in US dollars.

Question

Quizplus · Accepted Answer

To find the present value in US dollars, first convert the future cash flow from bhat to dollars using the forward rate: 17,087,500 bhat / 34.175 = $500,000. Then, discount this amount at 14%: $500,000 / (1 + 0.14) = $438,596.

The Spot Exchange Rate for the Thai Bhat Is 33