#23

Mia Caruso Enterprises, a U.S. manufacturer of children's toys, has made a sale in Bulgaria and is expecting a BGN4 million cash inflow in one year. The current spot rate is S=$1.800/BGN and the one-year forward rate is F1=$1.8857/BGN. a. What is the present value of Mia Caruso's BGN4 million inflow computed by first discounting the cash flow at the appropriate Bulgarian Lev discount rate of 5%, and then converting the result into dollars? b. What is the present value of Mia Caruso's BGN4 million inflow computed by first converting the cash flow into dollars, and then discounting at the appropriate dollar discount rate of 10% ? c. What can you conclude about whether these markets are internationally integrated, based on your answers to parts (a) and (b)? a. What is the present value of Mia Caruso's BGN4 million inflow computed by first discounting the cash flow at the appropriate Bulgarian Lev discount rate of 5%, and then converting the result into dollars? The present value of Mia Caruso's BGN4 million inflow is $ million. (Round to four decimal places.) b. What is the present value of Mia Caruso's BGN4 million inflow computed by first converting the cash flow into dollars, and then discounting at the appropriate dollar discount rate of 10% ? The present value of Mia Caruso's BGN4 million inflow is $ million. (Round to four decimal places.) c. What can you conclude about whether these markets are internationally integrated, based on your answers to parts (a) and (b)? A. Yes, the markets are not internationally integrated because the answers to (a) and (b) are not the same. B. No, the markets are not internationally integrated because the answers to (a) and (b) are the same. C. Yes, the markets are internationally integrated because the answers to (a) and (b) are the same. D. No, the markets are not internationally integrated because the answers to (a) and (b) are not the same