Solution-Compute the internal rate of return of the

Compute the internal rate of return of the norwegian project

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Reference no: EM133044160

Question - 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 1	Year 2	Year 3	Year 4
CF in kroner	10,000,000	15,000,000	17,000,000	20,000,000
Forecasted exchange rate	$0.12	$0.15	$0.14	$0.13

Required -

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

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

Reference no: EM133044160

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Compute the internal rate of return of the norwegian project

Reference no: EM133044160

Reference no: EM133044160

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