Mark Duncan owns a furniture manufacturing firm in the United States.He is considering an investment in Japan which will have the following cash flows: Initial cost = ¥-300,000,000,Year 1 = ¥150,000,000,Year 2 = ¥200,000,000,Year 3 = ¥250,000,000 and Year 4 = ¥100,000,000.The appropriate discount rate that should be used to discount yen-denominated cash flows is 11%.Calculate the NPV of the project,if Duncan plans on converting the NPV from Yen into U.S.dollars at the current spot rate of ¥123/$.

Question

Quizplus · Accepted Answer

To calculate the answer you just need to calculate the NPV in Japanese Yen using a discount rate of 11%.This will give you a NPV of ¥246,130,565.You then need to convert that figure into U.S.dollars at the current spot rate,which will give you $2,001,062.

Mark Duncan Owns a Furniture Manufacturing Firm in the United