7. International capital budgeting

One of the important components of multinational capital budgeting is to analyze the cash flows generated from subsidiary companies.

Consider this case:

Sacramone Products Co. is a U.S.-based firm evaluating a project in Mexico.

You have the following information about the project:

	The project requires a 130,000 peso investment today and is expected to generate cash flows of 61,500 pesos at the end of the next three years.
	The current U.S. exchange rate with the Mexican peso is 10.946 pesos per U.S. dollar, and the exchange rate is expected to remain constant.
	The firms WACC is 9%, and the project is of average risk.

What is the dollar-denominated net present value (NPV) of this project?

$2,580.13

$2,345.57

$2,697.41

$2,228.29