Answer:
NPV = $45,472.30
Explanation:
<em>The NPV is the difference between the PV of cash inflows and the PV of cash outflows. A positive NPV implies a good investment decision and a negative figure implies the opposite. </em>
<em>NPV of an investment: </em>
NPV = PV of Cash inflows - PV of cash outflow
PV of cash inflows = 45,000 ×1 .1^(-1) + 45,000 × 1.1^(-2) + 40,000 × 1.1^(-3) + 40,000 × 1.1^(-4)= 135,472.3038
Initial cost = 90,000
NPV = 135,472.3038 - 90,000 =$45,472.3038
NPV = $45,472.30
A)
- Firstly convert $3000000 into CAD
So, CAD is 3405221.33938
- Invest CAD in Canada 5% for 1 year
- In t= 1yr realize canadian investment with interest so, CAD on maturity
= CAD 3405221.33938 (1+ 0.05)
= CAD 3575482.40634
- Again now convert CAD into US $ so, equivalent US $ realised on conversion = CAD 3575482.40634 * $0.865/ CAD
= $ 3092792.28148
- US repayment = $ 3000000*(1+ 0.02)
= $ 3060000
That's why,
Profit over the year = $3092792.28148- $3060000
= $32792.28148
B) doesn't depreciates relative to USD
C) appreciates relative to Canadian dollar
D) BEEX = US$ borrowings to be repaid with interest/ CAD realized with interest on maturity
= $3060000/ CAD 3575482.40634
= 0.8558
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