Should the company make the investment

Reference no: EM131958299

Question: Your company is looking at a new project in Mexico. The project will cost 5,345,000 pesos. The cash flows are expected to be 2,442,000 pesos per year for 3 years. The current spot exchange rate is 20.7469 pesos per dollar. The risk-free rate in the US is 1.42% and the risk-free rate in Mexico 3.57%. The dollar required return is 13%. Should the company make the investment? Hint: Use the NPV method in connection with the foreign currency approach (do not use the home currency approach) to evaluate the investment.

Reference no: EM131958299

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