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Assume that Baps Corporation is considering the establishment of a subsidiary in Norway. This project requires an initial investment of 27 million Norwegian kroner. The
Assume that Baps Corporation is considering the establishment of a subsidiary in Norway. This project requires an initial investment of 27 million Norwegian kroner. The project is expected to generate net cash flows to the subsidiary of 10 million and 15 million kroner in the two yeas of operation, respectively. The project has no salvage value. The current exchange rate for the Norwegian kroner is $.135. Baps' exchange rate forecast for the Norwegian kroner is Year 1 at $.13 and Year 2 at $.14. What is the NPV of this project if the rquired rate of return is 13%? Answer a. $1,150,442 b. ($2,494,558) c. ($849,949) d. none of the above
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