Smith Enterprises International Investment
Smith Enterprises is considering opening a new manufacturing plant in France. The cost of the new plant will be €25 million and the plant is expected to generate after tax cash flows of €10 million at the end of each year for the next 4 years. After that the plant will be worthless. The current €/$ exchange rate is €0.8166/$. The expected rate of inflation for the U.S is 2.5% per year. The risk free rate in the U.S. is 4% and the risk free rate in France is 6%.
-Refer to Smith Enterprises International Investment. What is the cost of the manufacturing plant in U.S. dollars?
A) $20,415,000
B) $25,760,000
C) $30,615,000
D) $32,340,000
Correct Answer:
Verified
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