A US firm is considering purchasing a subsidiary in Italy. The subsidiary will cost 10M euros and will generate cash inflows of 1.2M euros per year for twenty years. The current exchange rate is $1.25 per euro. The current risk-free rate of interest in the US is 4% and the euro risk-free rate is 6%. What is the cash flow in year 1 if you are using the home currency ($) approach?

		$1.50M
		$0.94M
		$1.47M
		$1.43M
		$1.36M

Answer rating: 100% (QA)

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