Assume uncovered interest rate parity exists

Assignment Help Financial Management

Reference no: EM131933813

A project has an initial cost of £80,000 and is expected to return £10,000 the first year, £40,000 the second year, and £50,000 the third and final year. The current spot rate is £.56. The nominal risk-free return is 5 percent in the U.K. and 7 percent in the U.S. The return relevant to the project is 7.8 percent in the U.K. and 8.1 percent in the U.S. Assume uncovered interest rate parity exists.

a. What is the net present value of this project in U.S. dollars?

b. If the nominal risk free rate in the UK was 50 basis points (.5%) lower would the NPV be Greater or Lesser?

c. Not related to a. and b. above. With 160,000 issued shares and a current market price of $10.90 per share, Horoi Maa Ltd. has just announced a 7-for-3 share split. What will the market price per share be after the split?

Reference no: EM131933813

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