Question: Carpet Baggers Inc. is proposing to construct a new bagging plant in a country in Europe. The two prime candidates are Germany and Switzerland. The

Carpet Baggers Inc. is proposing to construct a new bagging plant in a country in Europe. The two prime candidates are Germany and Switzerland. The forecasted cash flows from the proposed plants are as follows:

Note: IRR: 15% for Germany, Switzerland: 12.8%

The spot exchange rate for euros is $1.3/, while the rate for Swiss francs is CHF 1.5/$. The interest rate is 5% in the United States, 4% in Switzerland, and 6% in the euro countries. The financial manager has suggested that, if the cash flows were stated in dollars, a return in excess of 10% would be acceptable.

Should the company go ahead with either project? If it must choose between them, which should it take?

Can anyone explain in detail calculation

C1 C2 C3 CA Cs Co IRR (%) -60 +10 +15 +15 +20 +20 +20 15.0 Germany (millions of euros) Switzerland (millions of Swiss francs) - 120 +20 +30 +30 +35 +35 +35 12.8

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