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marin [14]
2 years ago
15

You want to invest in a project in LaLaLand. The project has an initial cost of LLL 757,000 and is expected to produce cash infl

ows of LLL 396,000 a year for 3 years. The project will be worthless after that. The expected inflation rate in LaLaLand is 4% while it is only 3% in the U.S. The applicable interest rate for a project like this in LaLaLand is 12%. The current spot exchange rate is LLL1 = $2.3456.
What is the Net Present Value of this project in Lalaland's currency.(i.e., in "LLL")?
Business
1 answer:
Lelu [443]2 years ago
8 0

Answer:

194,112.8

Explanation:

The computation of  Net Present Value is shown below:-

Net Present Value = Present value of cash inflows - Present value of Cash outflows

= -757,000 + 396,000 × PVAF (12%, 3 years)

= -757,000 + 396,000 × 2.4018

= -757,000 + 951,112.8

= LLC 194,112.8

= 194,112.8

Therefore for computing the net present value we simply applied the above formula.

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a) $3

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Standard deviation = 200

Now,

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= $2

b)  critical ratio = \frac{\textup{cost of under-stocking }}{\textup{cost of overstocking + cost of under-stocking }}

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critical ratio = \frac{\textup{2}}{\textup{3 + 2}}

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c) optimal quantity of milk cartons = Mean + ( z × standard deviation )

here, z is the z-score for the critical ration of 0.4

we know

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