Estimated cash flows-calculate the net present value

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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?

Reference no: EM131044701

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