a. Rochester Co. is a U.S. firm that has a language institute in France. This institute attracts
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b. Rochester considers a new project in which it would also attract people from Spain, and the institute in France would teach them the French language; tuition would be charged in euros. The expenses for this project would be about the same as those for the one just described for American students. Assume that euros to be generated by this project would be stable over the next several years. Assume that this project is about the same size as the project for American students. For either project, the expected annual revenue is just slightly larger than the expected annual expenses. Is the valuation of net cash flows subject to a higher degree of exchange rate risk for this project or for the project for American students? Briefly explain.
Exchange Rate
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...
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