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 dollar required return is 10 percent per year, and the current spot exchange rate for Euros is € 0.5. The risk-free rate in the United States is 5 percent, and the risk-free rate in “Euro-land” is 7 percent.
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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 dollar required return is 10 percent per year, and the current spot exchange rate for Euros is € 0.5. The risk-free rate in the United States is 5 percent, and the risk-free rate in “Euro-land” is 7 percent.
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accountant