A U.S. company is considering a project in Mexico. Estimated cash flows are 10 million Mexican pesos the first year and $20 million Mexican pesos the second year. The U.S. company would incur a cost of $2 million at the start of the project, and its cost of capital is 12%. The expected spot rate is $0.13 for Year 1 and $0.11 for Year 2.
(1)Calculate the net present value of this project . Show how you derive the answer; and (2) Should the U.S. company invest in the project? Why or why not?© BrainMass Inc. brainmass.com December 20, 2018, 11:48 am ad1c9bdddf
The file shows the computation of NPV of international project.