Solution-Compute internal rate of return of norwegian

Compute internal rate of return of norwegian project

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Reference no: EM132953405

Bartley Corp., a U.S. company, is considering the establishment of a subsidiary in Norway. The initial investment required by the parent is $6 million. If the project is undertaken, the company would terminate the project after 4 years. Barley's cost of capital is 14 percent, and the project has the same risk as Bartley's existing projects. All cash flows generated from the project will be remitted to the parent at the end of each year. Listed below are the estimated cash flows the Norwegian subsidiary will generate over the project's lifetime in Norwegian kroner (NOK) and Bartley's forecasted exchange rates for the kroner. The current spot rate of the kroner is $.13.Year 1Year 2Year 3Year 4CF in kroner 10,000,000 15,000,000 17,000,000 20,000,000Forecasted exchange rate$0.12$0.15$0.14$0.13

(1) Compute the internal rate of return of the Norwegian project?

(2) Should the company go ahead with the project? Explain.

Reference no: EM132953405

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Compute internal rate of return of norwegian project

Reference no: EM132953405

Reference no: EM132953405

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