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An American firm is evaluating an investment in Mexico. The project will require purchasin

An American firm is evaluating an investment in Mexico. The project will require purchasin

An American firm is evaluating an investment in Mexico.  The project will require purchasing equipment from a variety of sources and shipping it to Mexico. The projected cost of buying the equipment and shipping it is $2.2 million. Once the project begins operations, it is expected to last for 5 years (assume straight line depreciation). Expected sales are $1,900,000 each year in the U.S. and the costs of the project are projected to be 5 million pesoseach year for the 5 years.  If taxes are 35%, the appropriate discount rate is 9% and you use the current exchange rate for pesos:

(a) Calculate the NPV in U.S. dollars. (Show all calculations and ignore working capital)

(b) Calculate the NPV in Mexican pesos. (Show all calculations and ignore working capital)

Rosa Parks 09-Nov-2017

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