An Italian firm is considering selling its line of coin-operated cappuccino machines in the U.K. The business risk will be identical to the firm's existing line of business in the euro zone, the cost of capital in the euro zone is i_€ = 10%. The expected inflation rate over the next two years in the U.K. is 3% per year and 2% per year in the euro zone. The spot exchange rates are $1.80 = £1.00 and $1.15 = €1.00
The pound sterling denominated cash flows are as follows:

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The Answer of An Italian firm is considering selling its line of coin-operated cappuccino machines in the U.K. The business risk will be identical to the firm's existing line of business in the euro zone, the cost of capital in the euro zone is i_€ = 10%. The expected inflation rate over the next two years in the U.K. is 3% per year and 2% per year in the euro zone. The spot exchange rates are $1.80 = £1.00 and $1.15 = €1.00 The pound sterling denominated cash flows are as follows:

An Italian Firm Is Considering Selling Its Line of Coin-Operated