An Italian firm is considering selling its line of coin-operated cappuccino machines in the U.K. The business risk will be identical to the firm's existing line of business in the euro zone, the cost of capital in the euro zone is 10%. The expected inflation rate over the next two years in the U.K. is 3% per year, and 2% per year in the euro zone. The spot exchange rates are $1.80/ and $1.15/ . The pound sterling denominated cash flows are as follows: What is the -denominated NPV of this project? a. 5,563 b. 2,271 c. 7,223 d. 3,554 Year 0 100,000

Year 1 25,000

Year 2 100,000

// SOLVE USING PPP and explain how you picked the numerator and dominator. pls