Business, 29.05.2020 06:01 zuberskylar

5. Louisville Co. is a U. S. firm considering a project in Austria which it has an initial cash outlay of $6 million. Louisville will accept the project only if it can satisfy its required rate of return of 15 percent. The project would definitely generate 2 million euros in one year from sales to a large corporate customer in Austria. In addition, it also expects to receive 4 million euros in one year from sales to other minor customers in Austria. Louisville's best guess is that the euro’s spot rate will be $1.26 in one year. Today, the spot rate of the euro is $1.40, while the one-year forward rate of the euro is $1.34. If Louisville accepts the project, it would hedge the receivables resulting from sales to the large corporate customer, and none of the expected receivables due to expected sales to other minor customers.

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5. Louisville Co. is a U. S. firm considering a project in Austria which it has an initial cash outl...

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