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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Solitaire Machinery is a Swiss multinational manufacturing company. Financial planners are considering undertaking a 1 year project in US. Project expected dollar-denominated cash-flows consist of an initial investment of $1,000 and a cash inflow the following year of $1,200.
Estimates that its risk-adjusted cost of capital is 12%
1 U.S. dollar will buy .90 Swiss franc
1 year risk-free securities in US are yielding 5%
similar securities in Switzerland are yielding 3.25%
a. If this project was instead undertaken by a similar US based company with the same risk adjusted cost of capital, what would be the net present value and rate of return generated by this project?
b. What is the expected forward exchange rate 1 year from now?
c. If Solitaire undertake the project, what is the net present value and rate of return of the project for Solitaire?
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