Question
Consider the following international investment opportunity: Year0 Year1 Year2 Year3 -50,000euro 15,000euro 15,000euro 20,000euro The current exchange rate is $1.60 = 1.00. The inflation rate
Consider the following international investment opportunity:
| Year0 | Year1 | Year2 | Year3 |
| -50,000euro | 15,000euro | 15,000euro | 20,000euro |
The current exchange rate is $1.60 = 1.00. The inflation rate in the U.S. is 3 percent and in the euro zone 2 percent. The appropriate cost of capital to a U.S.-based firm for a domestic project of this risk is 8 percent.
What is the euro-denominated IRR of this project?
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College Mathematics For Business Economics, Life Sciences, And Social Sciences
Authors: Raymond Barnett, Michael Ziegler, Karl Byleen, Christopher Stocker
14th Edition
0134674146, 978-0134674148
