A company is making a foreign capital expenditure in Europe. Initial cost of project: -30,000 EUR Length
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Question:
A company is making a foreign capital expenditure in Europe.
Initial cost of project: -30,000 EUR
Length of the project: 5 years
Cash flows of the years
- 6,000
- 7,000
- 9,000
- 9,000
- 8,000
Cost of capital: 5.5%
Long-run inflation in the U.S. (forecasted): 1%
Long-run inflation in the Europe. (forecasted): 2%
EUR/USD= 1.09
a) how would I calculate the NPV in EUR?
b) how to calculate NPV at the dollar cost of capital
c) How to calculate NPV in dollars if the pattern of the exchange rare is:
EUR/USD
Year 0= 1.09
Year 1= 1.17
Year 2= 1.21
Year 3= 1.28
Year 4= 1.30
Year 5= 1.32
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