What is expected value of the npv of project

Assignment Help Financial Management

Reference no: EM132050181

You are considering investing in a project in Mexico. The project will be a 2 year project, has an initial cost of 100K USD, and expected after tax profit of 1 million MXP per year. You expect the MXP to be valued at 0.12 USD/MXP. There are two major risks that you think have the potential to significantly affect project performance, which you assume are independent: * You think with probability of 0.22 that the MXP will depreciate to 0.1 USD/MXP. * You also think that with probability of 0.22 the Mexican economy will weaken substantially, in which case the project's after tax annual cash flow will be only 600K MXP. Your required return on the project is 18%. What is the expected value of the NPV of this project, as measured in USD?

Reference no: EM132050181

Questions Cloud

Applying the value-at-risk method : Applying the Value-at-Risk Method. You use today’s spot rate of the Brazilian real to forecast the spot rate of the real for one month ahead.

What is the project payback and MIRR : Project K costs $75,000, its expected cash inflows are $10,000 per year for 8 years, What is the project's MIRR? What is the project's payback?

What is the project NPV-IRR and MIRR : Project K costs $70,000, its expected cash inflows are $15,000 per year for 11 years and its WACC is 13%. What is the project's NPV? What is the project's MIRR?

Provide alternative investment strategy : Horizon review her husband’s decision and, if needed, provide an alternative investment strategy.

What is expected value of the npv of project : What is the expected value of the NPV of this project, as measured in USD?

What is maximum you should be willing to pay : You are considering a project that promises you cash flows of 565 USD each year for 3 years. What is the maximum you should be willing to pay?

Which security has a higher effective annual interest rate : Which security has a higher effective annual interest rate? Coupon bond or T-bill.

Describe the par value of common stock : Which item goes not properly describe the par value of common stock?

What percentage of final wealth has he sacrificed in fees : what percentage of his final wealth has he sacrificed in fees?

User Account

All Pages