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problem: A United State domiciled MNC is considering an acquisition in the United Kingdom. The target company will be sold at the end of three years for £100,000,000. The spot value is $1.51per £. The cash flows [excluding the estimated sale rate at year 3] & expected exchange rates are given in the following table. Determine the break-even purchase rate if the US MNC's required rate of return is 12 percent?


Period 1

Period 2

Period 3





Cash Flow in £




Expected F/X ($/£)







Basic Finance, Finance

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