Zimmer, a Manufacturer of Modular Rooms, Plans to Expand Its

Multiple Choice

Zimmer, a manufacturer of modular rooms, plans to expand its operation in Landshut, Germany. The expansion will cost $14.5 million and is expected to generate annual net cash flows of DM4.5 million for a period of 12 years and then the operation will be sold for DM2 million. The cost of capital for the project is 14%. Using the spot exchange rate of $0.60 per DM, compute the NPV of this expansion project.

A) $0.78 million
B) $1.03 million
C) $2.58 million
D) $11.39 million