A) Bloomberg Company is considering an investment project in Canada which has an initial cost of CAD6,120,000. The project is expected to return a one-time payment of CAD9,140,000 three years from now. The risk-free rate of return is 1.9 percent in the U.S. and 2.2 percent in Canada. The inflation rate is 1.8 percent in the U.S. and 2.1 percent in Canada. Currently, you can buy CD131.28 for $100. How much will the payment three years from now be worth in U.S. dollars?

$6,899,932

$6,737,514

$6,508,747

$6,650,443

$6,479,620

B) Netgear Company is considering an investment project in Canada. The project has an initial cost of CAD472,000 and is expected to produce cash inflows of CAD217,000 a year for three years. The project will be worthless after three years. The risk-free rate in the United States is 2 percent and the risk-free rate in Canada is 2.2 percent. The current spot rate is CAD1 = $.742. Netgear's required return on dollar investments of this type is 12 percent. What is the net present value of this project in U.S. dollars using the foreign currency approach?

$37,292

$42,618

$44,491

$40,769

$35,021