Foreign capital budgeting

Sandrine Machinery is a Swiss multinational manufacturing company. Currently, Sandrine's financial planners are considering undertaking a 1-year project in the United States. The project's expected dollar-denominated cash flows consist of an initial investment of $2000 and a cash inflow the following year of $2400 Sandrine estimates that its risk-adjusted cost of capital is 13% Currently, 1 U S dollar wil buy D 83 S iss franc. n addition 1 ear risk free securities in e United States are yielding 7.25% while similar securities in Switzerland are yielding 3 6 The data has been co lected in the Microsoft Excel Online il 10 . Open the spreadsheet and perform the required analysis to answer the questions below. Do not round intermediate calculations. Open spreadsheet a. If this project was instead undertaken by a similar U.S.-based company with the same risk-adjusted cost of capital, what would be the net present value and rate of return generated by this project? Round your answers to two decimal places NPV 123.89 Rate of return- 20U96 b. What is the expected forward exchange rate 1 year from now? Round your answer to two decimal places. 0.80SF per U.S. $ c. If Sandrine undertakes the project, what is the net present value and rate of return of the project for Sandrine? Do not round intermediate calculations Round your answers to two decimal places NPV39.123 Swiss Francs Rate of return- 1556* % Rate of return 15.66 % Check My Work Reset Problem Foreign capital budgeting Initial investment (U.S. Dollars) Year 1 Inflow (U.S. Dollars) Risk-adiusted cost of capital Spot rate, Number Swiss francs per U.S. Dollar Yield, 1-yr. U.S. securities Yield, 1-yr. Swiss securities $2,000 $2,400 13.00% 0.83 7 25% 30 % Formulas U.S. NPV U.S. rate of return #N/A #N/A #N/A #N/A 1-yr. forward rate, Swiss francs per U.S. Dollar Initial investment (Swiss francs) Year 1 Inflow (Swiss francs) #N/A NPV (Swiss francs) Swiss rate of return #N/A #N/A