Question
A firm in US is considering investing in a subsidiary in Japan. The subsidiary will cost 2 billion Yen and will generate cash inflows of
A firm in US is considering investing in a subsidiary in Japan. The subsidiary will cost 2 billion Yen and will generate cash inflows of 200M Yen per year forever. The current exchange rate is Yen110/$. The current risk-free rate of interest in the U.S. is 5% and the risk-free rate in Japan is 1%. What is the cash flow in year 1 if you are using the home currency approach?
| $2.11M | ||
| $1.81M | ||
| $1.74M | ||
| $1.89M | ||
| $1.98M |
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Finance In America An Unfinished Story
Authors: Kevin R. Brine, Mary Poovey
1st Edition
022650204X, 978-0226502045
