1.Foreign Investment Analysis

Chapman, Inc.'s Mexican subsidiary, V. Gomez Corporation, is expected to pay to Chapman 3 pesos in dividends in 1 year after all foreign and U.S. taxes have been subtracted. The exchange rate in 1 year is expected to be $0.05 per peso. After this, the peso is expected to depreciate against the dollar at a rate of 5% a year forever due to the different inflation rates in the United States and Mexico. The peso-denominated dividend is expected to grow at a rate of 6% a year indefinitely. Chapman owns 20 million shares of V. Gomez. What is the present value of the dividend stream, in dollars, assuming V. Gomez's cost of equity is 16%? Do not round intermediate calculations. Round your answer to the nearest dollar. Enter your answer in dollars.

2.Assume that interest rate parity holds. In the spot market 1 Japanese yen = $0.012, while in the 180-day forward market 1 Japanese yen = $0.0126. 180-day risk-free securities yield 2% in Japan. What is the yield on 180-day risk-free securities in the United States? Round your answer to 2 decimal places. Do not round intermediate calculations.

3.Quantitative Problem:International Machinery Company (IMC) is a Swedish multinational manufacturing company. Currently, IMC's financial planners are considering undertaking a 1-year project in the United States. The project's expected dollar-denominated cash flows consist of an initial investment of $2,650 and a cash inflow the following year of $3,600. IMC estimates that its risk-adjusted cost of capital is 15%. Currently, 1 U.S. dollar will buy 6.2 Swedish kronas. In addition, 1-year risk-free securities in the United States are yielding 6%, while similar securities in Sweden are yielding 5%.

a. If the interest parity holds, what is the forward exchange rate of Swedish krona per U.S. dollar? Round your answer to 2 decimal places. Do not round intermediate calculations. Swedish krona per U.S. dollar

b. If IMC undertakes the project, what is the net present value and rate of return of the project for IMC in home currency? Round your answer to 2 decimal places. Do not round intermediate calculations.

NPV: Swedish kronas Rate of return:%