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Carpet Baggers, Inc., is proposing to construct a new bagging plant in a country in Europe. The two prime candidates are Germany and Switzerland. The
Carpet Baggers, Inc., is proposing to construct a new bagging plant in a country in Europe. The two prime candidates are Germany and Switzerland. The forecasted cash flows from the proposed plants are as follows: The spot exchange rate for euros is $1.41/, while the rate for Swiss francs is SFr1.61/\$. The interest rate is 4% in the United States, 3% in Switzerland, and 5% in the euro countries. The financial manager has suggested that, if the cash flows were stated in dollars, a return in excess of 11% would be acceptable. a. Calculate the NPV in dollars for the German plant. (Do not round intermediate calculations. Enter your answer in millions roundec to 2 decimal places. b. Calculate the NPV in dollars for the Swiss plant. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) c. Should the company go ahead with either project? Yes No d. If it must choose between them, which should it take? Swiss plant German plant
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