Ch 17: 7.

International capital budgeting One of the important components of multinational capital budgeting is to analyze the cash flows generated from subsidiary companies. Consider this case: Sacramone Products Co. is a U.S. firm evaluating a project in Australia. You have the following information about the project:

The project requires an investment of AU$915,000 today and is expected to generate cash flows of AU$1,000,000 at the end of each of the next two years.

The current exchange rate of the U.S. dollar against the Australian dollar is $0.7877 per Australian dollar (AU$).

The one-year forward exchange rate is $0.8109 / AU$, and the two-year forward exchange rate is $0.8455 / AU$.

The firms weighted average cost of capital (WACC) is 9%, and the project is of average risk.

What is the dollar-denominated net present value (NPV) of this project? (CHOOSE ONE) :

A: $881,807

B: $845,065

C: $734,839

D: $661,355