Assume that Bach Corporation is considering the establishment of a subsidiary in Norway. The initial Norwegian Kroner investment required by the parent (in Year 0) is Kr 40,000,000. If the project is undertaken, Bach would terminate the project after four years. Bach's cost of capital is

13%,

and the project is of the same risk as Bachs existing projects. All cash flows generated from the project will be remitted to the parent at the end of each year. Listed below are the estimated cash flows the Norwegian subsidiary will generate over the project's lifetime in Norwegian kroner (NOK):

Year 0 Year 1 Year 2 Year 3 Year 4

-NOK 40,000,000 NOK10,000,000 NOK15,000,000 NOK17,000,000 NOK20,000,000

The current exchange rate of the Norwegian kroner is Kr8.3253/$. Bachs exchange rate forecast for the Norwegian kroner over the project's lifetime (in kroner per dollar) is listed below:

Year 0 Year 1 Year 2 Year 3 Year 4

8.3253 7.6923 7.1428 6.8965 6.6666

What is the NPV of the project in USD?

A.

$998,562

B.

$1,112,836

C.

$1,398,031

D.

$1,538,788