Rollerblade, a Manufacturer of Skating Gear, Plans to Expand Its

Multiple Choice

Rollerblade, a manufacturer of skating gear, plans to expand its operation in Brighton, England. The expansion will cost $18.5 million and is expected to generate annual net cash flows of 2.2 million pounds for a period of 15 years and nothing thereafter. The cost of capital for the project is 16%. Using the spot exchange rate of $1.60 per British pound, compute the net present value of the expansion project.

A) -$6.235 million
B) $2.458 million
C) $1.124 million
D) -$10.83 million