Lakonishok Equipment has an investment opportunity in Europe.

Question # 00004747 Posted By: neil2103 Updated on: 12/06/2013 12:07 AM Due on: 12/31/2013
Subject Accounting Topic Accounting Tutorials:
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Lakonishok Equipment has an investment opportunity in Europe. The project costs €15 million and is expected to produce cash flows of €2.9 million in Year 1, €3.5 million in Year 2, and €4.0 million in Year 3. The current spot exchange rate is $1.44/€; the current risk-free rate in the United States is 3.0 percent, compared to that in Europe of 2.5 percent. The appropriate discount rate for the project is estimated to be 12 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 €9.9 million.

What is the NPV of the project? (Enter your answer in thousands of dollars, not in millions. (e.g., 1,234,567). Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
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  1. Tutorial # 00004544 Posted By: neil2103 Posted on: 12/06/2013 12:18 AM
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    The solution of Lakonishok Equipment...
    Lakonishok_Equipment.xlsx (11.76 KB)

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