The Brankton Company, an American firm, considers investing in Spain. The investment will cost 125 million and

Question:

The Brankton Company, an American firm, considers investing in Spain. The investment will cost €125 million and is expected to generate, after taxes, €30 million a year during the next five years in real terms, that is, before inflation. The project would be liquidated at the end of the fifth year, and its terminal value is estimated at €30 million. The annual rate of inflation is expected to be 3 percent in the Euro-zone and 4 percent in the United States. The used by Brankton for its investments in the Euro-zone is 7 percent above the yield on government bonds. Currently, the rate on U.S. government bonds is 5 percent and the is EUR/USD 0.80. Calculate the of the project in U.S. dollars.
Net Present Value
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The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...