Question
1. Exchange rates A Mexican company is considering a project in Guatemala. The estimated economic results for the project (after taxes) are: Initital investment: -Q3,600,000
1. Exchange rates
A Mexican company is considering a project in Guatemala. The estimated economic results for the project (after taxes) are:
Initital investment: -Q3,600,000
Net cash flow in year 1: Q 450,000
Annual net cash flows in years 2 - 7: Q1,500,000
The company requires an 18% return in Mexican pesos (after taxes) on any investment in a foreign country.
The devaluation of the quetzal, relative to the Mexican peso, is estimated to average 12% per year. The present exchange rate is 20 quetzal for 1 peso.
Should the company accept this investment ?
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An Introduction To Socio-Finance
Authors: Jørgen Vitting Andersen, Andrzej Nowak
2013th Edition
3642419437, 978-3642419430
