Question
Suppose that Swiss pharma, Roche, is evaluating a proposal to build a new facility in the United States. To calculate the projects net present value,
Suppose that Swiss pharma, Roche, is evaluating a proposal to build a new facility in the United States. To calculate the projects net present value, Roche forecast the following dollar cash flows from the proposed project:
CASH FLOWS (in U.S dollars) ($millions)
C0 | C1 | C2 | C3 | C4 | C5 |
-1,300 | 400 | 450 | 510 | 575 | 650 |
The expected average cost of capital is 9.5%. The spot rate of exchange of the Swiss Franc is 1.3/$.
In the event your group is pessimistic about the outlook for the U.S dollar, what actions might you take to protect your investment should you move forward with this project?
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