The actual relationship between a nominal rate, R , a real rate, r , and an infl

Question

The actual relationship between a nominal rate, R, a real rate, r, and an inflation rate, h, can be written as:

Your company has a project in France. The project's cost is 2 million and the cash flows are .9 million per year for the next three years. The dollar required return is 10% and the current exchange rate is 0.500. The risk-free rate on euros is 7% per year. It is 5% per year on the dollar. The NPV for the project using the exact forms for UIP and the international Fisher effect is $. (Do not include the dollar sign ($). Input your answer in dollars, not in millions, e.g, $1,234,567.89. Round your answer to 2 decimal places. (e.g., 32.16))

The actual relationship between a nominal rate, R, a real rate, r, and an inflation rate, h, can be written as:

Explanation / Answer

Spot exchange rate: $1 =

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