Question
International Machinery Company (IMC) is a Swedish multinational manufacturing company. Currently, IMC's financial planners are considering undertaking a 1-year project in the United States. The
International Machinery Company (IMC) is a Swedish multinational manufacturing company. Currently, IMC'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 $2,200 and a cash inflow the following year of $3,750. IMC estimates that its risk-adjusted cost of capital is 17%. Currently, 1 U.S. dollar will buy 7.0 Swedish kronas. In addition, 1-year risk-free securities in the United States are yielding 2%, while similar securities in Sweden are yielding 1%.
If IMC undertakes the project, what is the net present value and rate of return of the project for IMC in home currency? Round your answer to 2 decimal places. Do not round intermediate calculations. NPV:_______ Swedish kronas Rate of return:_________ %
(I have worked this problem several times and got 3775.96 for the NPV and 14.53 for the rate of return. Both were wrong answers, I am not sure where I am going wrong in the calculations)
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