The current exchange rate is $1.60 = 1.00. The inflation rate in the U.S. is 3 percent and in the euro zone 2 percent. The appropriate cost of capital to a U.S.-based firm for a domestic project of this risk is 8 percent.

Find the euro-zone cost of capital for this international project. (2 marks)

What is the euro-dominated NPV of this project? (4 marks)

What is the dollar-denominated NPV of this project? (2 marks)

The current exchange rate is $1.60 = 1.00. The inflation rate in the U.S. is 3 percent and in the euro zone 2 percent. The appropriate cost of capital to a U.S.-based firm for a domestic project of this risk is 8 percent. Find the euro-zone cost of capital for this international project. (2 marks) What is the euro-dominated NPV of this project? (4 marks) What is the dollar-denominated NPV of this project? (2 marks) LUITSTUEI LITE TONIO VIIIY II Lenalui la lliVESL TELL Uppuiluilly. Year 0 Year 1 Year 2 Year 3 -50,000 15,000 15,000 20,000 nn TI The current exchange rate is $1.60 = 1.00. The inflation rate in the U.S. is 3 percent and in the euro zone 2 percent. The appropriate cost of capital to a U.S.-based firm for a domestic project of this risk is 8 percent. Find the euro-zone cost of capital for this international project. (2 marks) What is the euro-dominated NPV of this project? (4 marks) What is the dollar-denominated NPV of this project? (2 marks) LUITSTUEI LITE TONIO VIIIY II Lenalui la lliVESL TELL Uppuiluilly. Year 0 Year 1 Year 2 Year 3 -50,000 15,000 15,000 20,000 nn TI