An Italian firm is considering investing its line of coin-operated cappuccino machines in the U.K. This project requires an initial investment of £100,000, and generates £25,000 and £100,000 in the following 2 years, respectively. The cost of capital in the euro zone is i€ =10%. The expected inflation rate over the next two years in the U.K. is 4% per year and 5% per year in the euro zone. The spot exchange rate is €1.00 =£0.4497. 

What is the €-denominated NPV of this project?

Answer rating: 100% (QA)

To calculate the denominated NPV of the project we need to convert all cash flows from pounds to eur... View the full answer