1. Pulse is considering acquisition of a company in London Its initial investment would be $39 million It will reinvest all the earnings in the company
2. It expects that at the end of 8 years, it will sell the company for 17 million euros after capital gains taxes are paid.
3. The spot rate of the euro is $113 and is used as the forecast of the euro in the future year’s Pulse has no plans to hedge its exposure to exchange rate risk
4. The annualized US risk-free interest rate is 05 regardless of the maturity of the debt, and the annualized risk-free interest rate on euros is 07, regardless of the maturity of debt Assume that interest rate parity exists Pulse’s cost of capital is 015 It plans to use cash to make the acquisition What is the NPV? Get Accounting help Today