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A year ago, the spot exchange rate of the euro was $ 1 . 2 0 . At that time, XT Co . ( a

A year ago, the spot exchange rate of the euro was $1.20. At that time, XT Co.(a U.S. firm) invested $4 million to establish a project in the Jordan. It expected that this project would generate cash flows of 3 million euros at the end of the first and second years . XT Co. always uses the spot rate as its forecast of future exchange rates . uses a required rate of return of 20 percent on international projects . Because conditions in the Jordan are weaker than expected , the cash flows in the first year of the project were 2 million euros , and XT now believes the expected cash flows for next year will be 1 million euros A company offers to buy the project from XT today for $3.25 million . Assume no tax effects . Today , the spot rate of the euro is $1.30. Should XT accept the offer?

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