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 $2,900 and a cash inflow the following year of $3,900. IMC estimates that its risk-adjusted cost of capital is 19%. Currently, 1 U.S. dollar will buy 6.4 Swedish kronas. In addition, 1-year risk-free securities in the United States are yielding 3%, while similar securities in Sweden are yielding 2%.

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 krona per U.S. dollar

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Realize that Sweden is the home country in this problem.

Refer to the interest rate parity equation substituting values given to calculate the 1-year forward rate.

The spot rate in the problem is expressed in terms of the amount of home currency per unit of foreign currency. (Home currency = Swedish krona)

Calculate the value on the right-hand side of the equation because both values are known. Now, you can calculate the forward exchange rate in terms of Swedish krona per U.S. dollar.

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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: Swedish kronas Rate of return: %