How do international factors affect decision making Although the same basic principles of capital budgeting apply to both foreign and domestic operations, there are some key differences Solitaire Machinery is a Swiss multinational manufacturing company Currently, Solitaire 's financial planners are considering undertaking a 1 year project in the United States The Project 's expected dollar denominated cash flows consist of an initial investment of $1,000 and a cash inflow the following year of $1200 Solitaire estimates that its risk adjusted cost of capital is 12 Currently, 1 U S dollar will buy 0 90 Swiss francs In addition 1 year risk free securities in the United States are yielding 5 while similar securities in Switzerland are yielding 3 25 a If this project was instead undertaken by a similar U S based company with the same risk adjusted cost of capital, what would be the net present value and rate of return generated by the project b What is the expected forward exchange rate 1 year from now c If Solitaire undertakes the project, what is the net present value and rate of return of the project for Solitaire

Question: How do international factors affect decision making? Although the same basic principles of capital budgeting apply to both foreign and domestic operations, there are some

How do international factors affect decision making? Although the same basic principles of apply to both foreign and domestic operations, there are some key differences. Solitaire Machinery is a Swiss multinational manufacturing company. Currently, Solitaire's financial planners are considering undertaking a 1- year project in the United States. The Project's expected dollar-denominated cash flows consist of an initial investment of $1,000 and a cash inflow the following year of $1200. Solitaire estimates that its risk-adjusted is 12%. Currently, 1 U.S. dollar will buy 0.90 Swiss francs. In addition 1-year risk-free securities in the United States are yielding 5% while similar securities in Switzerland are yielding 3.25%. a. If this project was instead undertaken by a similar U.S. based company with the same risk-adjusted what would be the and rate of return generated by the project? b. What is the expected forward 1 year from now? c. If Solitaire undertakes the project, what is the and rate of return of the project for Solitaire?

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