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Nestle Chocolate is a Swiss company. Nestle is considering undertaking 1-year project in the US. The project's expected dollar-denominated cash flows consist of an initial
Nestle Chocolate is a Swiss company. Nestle is considering undertaking 1-year project in the US. The project's expected dollar-denominated cash flows consist of an initial investment of $5,000 and a cash inflow the following year of $7,500. Nestle estimates that its risk-adjusted cost of capital is 12%. In the spot market, 1 US dollar will buy.95 Swiss franc. US one- year risk-free securities are yielding 2%, while one-year Swiss securities are yielding 1%. If Nestle undertakes the project, what is the net present value in Swiss Francs? (Make sure to adjust cash flows for currency effects using spot and forward rates). $1,565 $ $1,585 $1,652 O $1,549 O $ $1,528
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