# Finance

You are evaluating a proposed expansion of an existing subsidiary located in Switzerland. The cost of the expansion would be SF 32.4 million. The cash flows from the project would be SF 9 million per year for the next five years. The dollar required return is 15 percent per year, and the current exchange rate is SF 1.72. The going rate on Eurodollars is 9 percent per year. It is 8 percent per year on Euroswiss.

We can use relative purchasing power parity to calculate the dollar cash flows at each time. The equation is:

E[St] = (SFr 1.720)[1 + (0.08 – 0.09)]t
E[St] = 1.720 (0.99)t

So, the cash flows each year in U.S. dollar terms will be:

t SFr E[St] US\$
0 –32.4M 1.7200 \$-18,837,209.30
1 +9M 1.7028 \$5,285,412.26
2 +9M 1.6858 \$5,338,800.26
3 +9M 1.6689 \$5,392,727.54
4 +9M 1.6522 \$5,447,199.54
5 +9M 1.6357 \$5,502,221.75

--------------------------------------------------------------------------------

And the NPV is:

NPV = –\$18,837,209.30 + \$5,285,412.26/1.15 + \$5,338,800.26/1.152 + \$5,392,727.54 /1.153 + \$5,447,199.54/1.154 + \$5,502,221.75/1.155

NPV = \$-808,462.07

The problem for me is, I cant figure out what numbers replace 9M in the column in order to times the SF and ES to get the US dollars. Whats the formula or where am I just not looking at?

1. 👍 0
2. 👎 0
3. 👁 473
1. The M here stands for Million hence 9M = 9 Million.

1. 👍 0
2. 👎 0

## Similar Questions

1. ### international finance

Suppose you are evaluating a proposed expansion of an existing subsidiary located in France. The cost of the expansion would be € 2 million. The cash flows are expected to be € 0.9 million a year for the next three years. The

asked by Aidarous Ahmed on December 11, 2019

On January 1, 20X1, Parent Company acquired 80% of the common stock of Subsidiary Company for \$560,000 On this. date Subsidiary had total owners' equity of \$540,000, including retained earnings of \$240,000. During 20X1, Subsidiary

asked by carol on November 30, 2012
3. ### accounting

I am attempting to study for an exam for tomorrow and cannot figure out the equity method entries up to 2006 for this problem, can someone please help! Parent Corporation owns 80% of Subsidiary Corporationâ€™s outstanding

asked by Bob on April 5, 2010
4. ### Finance

The management of One-M Berhad is considering an expansion project for their current business. RM125,000 is needed for the expansion and two options has been proposed. Under Option I, the project will be financed by issuing new

asked by Anonymous on May 19, 2012
5. ### Lang. Arts

These positions were in (24) Switzerland Prague and Germany. Correct this portion of the sentence Switzerland Prague Switzerland, Prague, Switzerland Prague, Switzerland, Prague no error I think it is C...?

asked by Cassie on March 8, 2013
6. ### algebra

It would cost \$79.59 to buy three tickets in Japan plus two tickets in Switzerland. Three tickets in Switzerland plus two tickets in Japan would cost \$75.31. How much does an average movie ticket cost in each of these countries?

asked by Christina on August 13, 2012
7. ### Economics

What are the conditions of China's economy in transition these past few years? How does it benefit(or harm) the country Switzerland? If it benefits Switzerland, how will Switzerland's IMF(international monetary fund)be affected or

asked by Lana on February 26, 2015
8. ### Civics

An American factory needs to buy special tools which are made only by companies in either Switzerland or Britain. The tools made in Switzerland cost 100 francs apiece; the ones made in Britain cost 100 pounds each. Based on the

asked by Anonymous JAK on May 21, 2016
9. ### algebra

Average movie ticket prices in the united states are, in general, lower than other countries. It would cost in \$80.22 to buy three tickets in Japan plus two tickets in Switzerland. Three tickets in Switzerland plus two tickets in

asked by need help on August 22, 2014
10. ### algebra

If 3 tickets in Japan, plus 2 tickets in Switzerland cost \$79.50, and 3 tickets in Switzerland plus 2 tickets in Japan cost \$75.30, how much is the average ticket in each country?

asked by kris on October 19, 2011

More Similar Questions