Carpet baggers inc..rated a+ assignment! goodluck


Carpet Baggers Inc. is proposing to construct a new bagging plant in a country in Europe. The

two prime candidates are Germany and Switzerland. The forecasted cash flows from the

proposed plants are as follows:

(table see attached)

The spot exchange rate for euros is $1.3/€, while the rate for Swiss francs is CHF 1.5/$. The

interest rate is 5% in the United States, 4% in Switzerland, and 6% in the euro countries. The

financial manager has suggested that, if the cash flows were stated in dollars, a return in excess

of 10% would be acceptable.

Should the company go ahead with either project? If it must choose between them, which should

it take?

Please explain your answer in detail and provide in-text citations.

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