Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. suppose you have just established a company in sco

Suppose you have just established a company in Scotland that generates free cash flows at...

80.2K

Verified Solution

Question

Finance

image
Suppose you have just established a company in Scotland that generates free cash flows at 100, 200, 100, 50 and 300 in the next five years. To set up the company, you had invested 400 today. The capital for the initial investment is raised in US with a cost of 15%. You can convert the US cost of capital into UK cost of capital, based on Fisher effect (the real rates of two countries are the same). The US inflation rate is expected to be 10% per year in the next 5 years and the UK inflation is expected to be 3% per year at the same time. Right now, the exchange rate of British Pound is $1.4/ e. Which currency is going to depreciate? What would be the exchange rate for pound each year from year 1 to year 5? f. Please convert the cash flows in pound into cash flows in dollars based on the exchange rates asked in (a). g. What would be your Net Present Value and Internal Rate of Return measured in Pound? h. What would be your Net Present Value and Internal Rate of Return measured in dollar

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students