A company is doubting between 2 projects: in Mexico or in Colombia. The MARR in Mexico is 12%. The current exchange rates of the Colombian peso against the Mexican peso is $40. The Colombian peso is expected to depreciate every year with 75%. Investments, cash flows and salvage values: ATCF (in 1,000s of real pesos) of each project:

Mexico Colombia

Initial inv. -400 -15,000

Cash flows* 85 4,000

Salvage Value** 60 2,000

Useful life 5 years 6 years

* Annual, constant, after tax, real pesos ** Salvage value is (also) in real pesos.

Which project better?