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 2,700 and a cash inflow of the following year of 3,700. IMC estimates that its risk-adjusted cost of capital is 12%. Currently, 1 U.S. dollar will buy 7.9 Swedish kronas. In addition, 1-year risk-free securities in the United States are yielding 2%, while similar securities in Sweden are yielding 1%. A - If the interest parity holds, what is the forward exchange rate of Swedish krona per U.S. dollar? Round your answer to 2 decimal places. Do not round intermediate calculations. Swedish Kronas per US Dollar = ??? B - 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 = what in Swedish Kronas?
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