An Australian Firm Is Evaluating a Proposal to Build a New

An Australian firm is evaluating a proposal to build a new plant in the United States. The expected cash flows in $US (in millions) are as follows: Year 0, −100; Year 1, 40; Year 2, 50; Year 3, 65. The discount rate in $A is 10 percent, while the discount rate in $US is 12 percent and the spot rate is $US0.60/$A. Calculate the NPV of the project in $US.

A) +36.40
B) −21.84
C) +13.10
D) +21.84

Correct Answer:

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