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International Machinery Company (IMC) is a Swedish multinational manufacturing company. Currently, IMC's financial planners are considering undertaking a 1-year project in the United States. The project's expected dollar-denominated cash flows consist of an initial investment of $2,000 and a cash inflow the following year of $3,600. IMC estimates that its risk-adjusted cost of capital is 17%. Currently, 1 U.S. dollar will buy 7.2 Swedish kronas. In addition, 1-year risk-free securities in the United States are yielding 5%, while similar securities in Sweden are yielding 4%.

a. If the interest parity holds, what is the forward exchange rate of Swedish krona per U.S. dollar? Round your answer to 2 decimal places. Do not round intermediate calculations.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92296316

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