Business, 19.08.2021 23:10 Nickanderson21
Carpet Baggers, Inc., is proposing to construct a new bagging plant in a country in Europe. The two prime candidates are Germany and Switzerland. The forecasted cash flows from the proposed plants are as follows:
The spot exchange rate for euros is $1.3/€, while the rate for Swiss francs is SFr 1.5/$. The interest rate is 5% in the United States, 4% in Switzerland, and 6% in the euro countries. The financial manager has suggested that, if the cash flows were stated in dollars, a return in excess of 10% would be acceptable.
Should the company go ahead with either project? If it must choose between them, which should it take?
C0 C1 C2 C3 C4 C5 C6 IRR(%)
Germany(millions of euros ) -60 +10 +15 +15 +20 +20 +20 18.8
Switzerland -120 +20 +30 +30 +35 +35 +35 12.8
(millions of Swiss francs)
Answers: 1
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Carpet Baggers, Inc., is proposing to construct a new bagging plant in a country in Europe. The two...
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