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13. Carpet Baggers, Inc., is proposing to construct a new bagging

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13. 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:

C0 C1 C2 C3 C4 C5 C6 IRR(%)
Germany -60 +10 +15 +15 +20 +20 +20 18.8
(millions of euros)

Switzerland -120 +20 +30 +35 +35 +35 +35 12.8
(millions of Swiss francs)

The spot exchange rate for euros is $1.3/k, while the rate for Swiss francs is SFr 1.5/$.
The interest rate is 5 percent in the United States, 4 percent in Switzerland, and 6 percent
in the euro countries. The financial manager has suggested that, if the cash flows
were stated in dollars, a return in excess of 10 percent would be acceptable.
Should the company go ahead with either project? If it must choose between them,
which should it take?
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Customer: replied 6 years ago.
Thank you so much!! I did have that typo. Thanks for pointing it out and that it did not change the answer. I also appreciate your fast response time. Thanks again!!

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