It is the year 2018 and Pork Barrels Inc. is considering construction of a new barrel plant

Question:

It is the year 2018 and Pork Barrels Inc. is considering construction of a new barrel plant in Spain. The forecasted cash flows in millions of euros are as follows:

The spot exchange rate is $1.2 = ‚¬1. The interest rate in the United States is 8% and the euro interest rate is 6%. You can assume that pork barrel production is effectively riskfree.
a. Calculate the NPV of the euro cash flows from the project. What is the NPV in dollars?
b. What are the dollar cash flows from the project if the company hedges against exchange rate changes?
c. Suppose that the company expects the euro to depreciate by 5% a year. How does this affect the value of theproject?

Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...