Newsat Telco is planning on investing $40 billion in Europe this year for a satellite communications systems. The expected cash flow over the next three years is 20.6 billion Euros per year growing at the rate of inflation. After three year they will abandon the system as worthless. The European current and expected inflation rate is 5.2% per annum over this period and the U.S. inflation rate is expected to be 2.8% per annum. The current exchange rate is $.9/Euro. Newsat has a U.S. cost of capital of 15%. Should Newsat invest?

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The Answer of Newsat Telco is planning on investing $40 billion in Europe this year for a satellite communications systems. The expected cash flow over the next three years is 20.6 billion Euros per year growing at the rate of inflation. After three year they will abandon the system as worthless. The European current and expected inflation rate is 5.2% per annum over this period and the U.S. inflation rate is expected to be 2.8% per annum. The current exchange rate is $.9/Euro. Newsat has a U.S. cost of capital of 15%. Should Newsat invest?

Newsat Telco Is Planning on Investing $40 Billion in Europe