Carpet Baggers, Inc., is proposing to construct a new bagging plant in a country in Europe. The

Question:

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 $1.3/â‚¬, while the rate for Swiss francs is SFr 1.5/$. 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 ittake?

Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...