Lakonishok Equipment has an investment opportunity in Europe. The project costs €12 million and is expected to produce cash flows of €2.0 million in Year 1, €2.4 million in Year 2, and €3.5 million in Year 3. The current spot exchange rate is $1.35/€ and the current risk-free rate in the United States is 2.8 percent, compared to that in Europe of 2.0 percent. The appropriate discount rate for the project is estimated to be 14 percent, the U.S. cost of capital for the company. In addition, the subsidiary can be sold at the end of three years for an estimated €9.0 million. What is the NPV of the project? (Do not round intermediate calculations and enter your answer in dollars, not in millions, rounded to 2 decimal places, e.g., 1,234,567.89.) NPV

Lakonishok Equipment has an investment opportunity in Europe. The project costs €12 million and is expected to produce cash flows of €2.0 million in Year 1, €2.4 million in Year 2, and €3.5 million in Year 3. The current spot exchange rate is $1.35/€ and the current risk-free rate in the United States is 2.8 percent, compared to that in Europe of 2.0 percent. The appropriate discount rate for the project is estimated to be 14 percent, the U.S. cost of capital for the company. In addition, the subsidiary can be sold at the end of three years for an estimated €9.0 million. What is the NPV of the project? (Do not round intermediate calculations and enter your answer in dollars, not in millions, rounded to 2 decimal places, e.g., 1,234,567.89.) NPV

Fundamentals of Financial Management, Concise Edition (MindTap Course List)

9th Edition

ISBN:9781305635937

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter17: Multinational Financial Management

Section: Chapter Questions

Problem 17P: FOREIGN CAPITAL BUDGETING Sandrine Machinery is a Swiss multinational manufacturing company....

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