case "Groupe Ariel S.A.: Parity Conditions and Cross-Border Valuation" (Luehrman and Quinn)

1) Assume 4% inflation going forward in France.Based on this assumption and the information contained in the case, what hurdle (discount or cost of capital) rate, in pesos, would you use to discount the cash flows from the project?Show your calculations and assumptions.

2) Compute the project cash flows in pesos for years 0 through 10 and calculate the NPV in pesos.Calculate the MIRR of the project assuming reinvestment rate is equal to cost of capital.

3) Convert the Peso NPV to Euros at the June 23, 2008 spot exchange rate.