You are considering a project in Poland which has an initial cost of 375,000PLN. The project is expected to return a one-time payment of 500,000PLN 4 years from now. The risk-free rate of return is 4 % in Canada and 4.5 % in Poland. Currently, you can buy 323PLN for $100. How much will the payment 4 years from now be worth in Canadian dollars?

Question

Quizplus · Accepted Answer

To find the future value in Canadian dollars, first calculate the present value of the 500,000 PLN payment using the Polish risk-free rate: PV = 500,000 / (1 + 0.045)^4. Then convert this present value to Canadian dollars using the current exchange rate: 323 PLN = $100, so 1 PLN = $100/323. Finally, multiply the present value in PLN by the exchange rate to get the value in Canadian dollars.

You Are Considering a Project in Poland Which Has an Initial