FINANCIAL -Quantitative Problem-International Machinery Company

FINANCIAL -Quantitative Problem-International Machinery Company

FINANCIAL 5402-Quantitative Problem-International Machinery Company
Subject: Business    / Finance
Question
Quantitative Problem: International Machinery Company (IMC) is a Swedish multinational manufacturing company. Currently, IMC’s financial planners are considering undertaking a 1-year project in the United States. The project’s expected dollar-denominated cash flows consist of an initial investment of $2,900 and a cash inflow the following year of $3,900. IMC estimates that its risk-adjusted cost of capital is 19%. Currently, 1 U.S. dollar will buy 6.4 Swedish kronas. In addition, 1-year risk-free securities in the United States are yielding 3%, while similar securities in Sweden are yielding 2%.

If IMC undertakes the project, what is the net present value and rate of return of the project for IMC in home currency? Round your answer to 2 decimal places. Do not round intermediate calculations.
NPV: Swedish kronas
Rate of return: %