Question: Suppose that Alexander Co, a U.S.-based MNC, is trying to decide the location of a new project in which they plan to invest. Alexander can

Suppose that Alexander Co, a U.S.-based MNC, is trying to decide the location of a new project in which they plan to invest. Alexander can invest in the new project in either the United States or Germany. Upon completion, the project will comprise 50.00% of Alexander's total invested funds, with the remaining 50.00% being invested in the United States. Forecasted information regarding the proposed project over a 5-year period, including the 50.00% of funds invested in the existing business, are shown in the following table: Existing Business Characteristics of Proposed Project Located in United Located in States Germany 25.00% 25.00% 0.06 0.1 Mean expected annual return on investment (after taxes) Standard deviation of expected annual after-tax returns on investment Correlation of expected annual aftertax returns on investment with aftertax returns of existing U.S. business 15.00% 0.1 0.5 0.2 If the firm decides to invest in the project located in the United States, the firm's overall expected return (after taxes) is forecasted to be percent. 17 the firm decides to invest in the project located in Germany, the firm's overall return (after taxes) is forecasted to be percent

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