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: The spot exchange rate for euros is $1.41/, while the rate for Swiss francs is SFr1.61/\$. The interest rate is 4% in the United States, 3% in Switzerland, and 5% in the euro countries. The financial manager has suggested that, if the cash flows were stated in dollars, a return in excess of 11% would be acceptable. a. Calculate the NPV in dollars for the German plant. (Do not round intermediate calculations. Enter your answer in millions roundec to 2 decimal places. b. Calculate the NPV in dollars for the Swiss plant. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) c. Should the company go ahead with either project? Yes No d. If it must choose between them, which should it take? Swiss plant German plant
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
