Net Present Value exercise problem?

In this example we have to calculate the NPV. However, I have doubt if the soultion is wrong or not, because if the exchange rate is 1,54 (EUR to USD), shouldn't I multiply 250,000 x 1,54 rather than dividing by 1,54?

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2 Answers

  • 1 month ago
    Favorite Answer

    Updated in reply to your comment.

    I think you are correct.   I misinterpreted the data in the question.

    There *is* a mistake in the official answer.  An exchange rate of 1 euro = 1.54 USD can be written as: ‘euro to USD = 1.54’ or EUR/USD = 1.54

    Note, EUR/USD does not mean euros per US dollar.  It means how many dollars it takes to buy 1 euro.

    Therefore to change euros to USD you multiply by1.54.

    (To change USD to euros you divide by1.54 (same as multiplying by 1/1.54 = 0.649.  This means USD/EUR = 0.649.)

  • 037 G
    Lv 6
    1 month ago

    the table says 1.54 Euro is equivalent to 1 US dollar so to find how many Dollars in 300,000 Euros find how many 1.54s are in 300,000 since every 1.54 is one dollar so 300,000/1.54 gives you the number of dollars in 300,000. 

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