1. Estimate discount rates for the project using Lessard method Use data given in Table 2.
2. Compute NPVs using the discount rate from step 1.
3. Compute IRR and compare against the discount rate from step 1.

Balance Sheet ($ millions) Dec/31/05 Dec/31/04 Dec/31/03 18,531 25,359 9,487 7,000 60,377 108,639 26,240 195,256 10.626 24,309 8,957 2068 45,960 104,965 23,353 174 278 Fiscal Year Ending Assers Cash Net receivables Inventories Other current assets Total current assets Net fred assets Other noncurrent assets Total sets Liabilities and shareholders' equity Accounts payable Short-term debt Other current abilities Total current abilities Long-term debt Other noncurrent abilities Total abades Common stock equity Total shareholders' equity Total shareholders' equity and liabilities 28,671 27,484 9,321 7.866 73,342 107,010 27,983 208,335 36,120 1,771 8,416 46,307 6.220 20,217 97,140 111,185 111,160 208,335 31,763 3.280 7,938 42,981 5,013 20,462 93,500 101,756 101,750 195.256 15,334 4,789 18,263 38,386 4,756 17,721 84,300 89.915 80,015 174 278 Sawer Mera Exhibit 2 Income Statement is millions) Fiscal Year Ending Revenues Costs of goods sold Gross profit SG&A expenses Depreciation and amortization Operating income Non-operating Income Non-operating expenses Income before taxes Income taxes Net Income after taxes Dec/31/os 328,213 213,002 115.211 14,402 10,253 49,002 11,725 42.05 60,231 23,302 36,929 Dec/31/04 263,989 163,547 100,442 13.849 9,767 35,872 6,783 41,592 42,017 15,911 26.106 Dec/31/03 213,199 129,928 83,271 13,396 9,047 23,183 9,684 37,852 32,66 11,005 21,654 Source IESE Busine School University of Na Projet Evaluation in Emerging Market Mati Ciland Argentina Exhibit 3 Cash Flow Statement ($ millions) Fiscal Year Ending Net operating cash flow Net Invesing cash flow Net fnancing cash fow Net change in cash Dec/31/os Ded31/04 Ded/31/03 48,138 40.551 28.498 -10,270 -14,910 -10,842 -25,941 -18,268 -14,763 10.140 7,905 3,397 Source: Move Table 2 Financial Information: Risk-free rate World market risk premium Argentina's yield spread Oil industry beta Argentina's beta Argentina's stock market volatility World stock market volatility Correlation between Argentina's stock market and bond market 4.40% 5.00% 5.00% 0.69 1.10 40.60% 14.71% 0.35 Risk-free rate is the yield on 10-year U.S. Treasury Notes at year-end 2005. Market risk premium estimated for the world market over the 1900-2000 period. Yield spread calculated with respect to U.S. bonds at year-end 2005. Betas calculated with respect to the world market over the Jan/96-Dec/05 period. Volatility measured by the standard deviation of returns over the Jan/96-Dec/05 period, annualized. Correlation between Argentina's stock market and bond market estimated over the Jan/96- Dec/05 period. Balance Sheet ($ millions) Dec/31/05 Dec/31/04 Dec/31/03 18,531 25,359 9,487 7,000 60,377 108,639 26,240 195,256 10.626 24,309 8,957 2068 45,960 104,965 23,353 174 278 Fiscal Year Ending Assers Cash Net receivables Inventories Other current assets Total current assets Net fred assets Other noncurrent assets Total sets Liabilities and shareholders' equity Accounts payable Short-term debt Other current abilities Total current abilities Long-term debt Other noncurrent abilities Total abades Common stock equity Total shareholders' equity Total shareholders' equity and liabilities 28,671 27,484 9,321 7.866 73,342 107,010 27,983 208,335 36,120 1,771 8,416 46,307 6.220 20,217 97,140 111,185 111,160 208,335 31,763 3.280 7,938 42,981 5,013 20,462 93,500 101,756 101,750 195.256 15,334 4,789 18,263 38,386 4,756 17,721 84,300 89.915 80,015 174 278 Sawer Mera Exhibit 2 Income Statement is millions) Fiscal Year Ending Revenues Costs of goods sold Gross profit SG&A expenses Depreciation and amortization Operating income Non-operating Income Non-operating expenses Income before taxes Income taxes Net Income after taxes Dec/31/os 328,213 213,002 115.211 14,402 10,253 49,002 11,725 42.05 60,231 23,302 36,929 Dec/31/04 263,989 163,547 100,442 13.849 9,767 35,872 6,783 41,592 42,017 15,911 26.106 Dec/31/03 213,199 129,928 83,271 13,396 9,047 23,183 9,684 37,852 32,66 11,005 21,654 Source IESE Busine School University of Na Projet Evaluation in Emerging Market Mati Ciland Argentina Exhibit 3 Cash Flow Statement ($ millions) Fiscal Year Ending Net operating cash flow Net Invesing cash flow Net fnancing cash fow Net change in cash Dec/31/os Ded31/04 Ded/31/03 48,138 40.551 28.498 -10,270 -14,910 -10,842 -25,941 -18,268 -14,763 10.140 7,905 3,397 Source: Move Table 2 Financial Information: Risk-free rate World market risk premium Argentina's yield spread Oil industry beta Argentina's beta Argentina's stock market volatility World stock market volatility Correlation between Argentina's stock market and bond market 4.40% 5.00% 5.00% 0.69 1.10 40.60% 14.71% 0.35 Risk-free rate is the yield on 10-year U.S. Treasury Notes at year-end 2005. Market risk premium estimated for the world market over the 1900-2000 period. Yield spread calculated with respect to U.S. bonds at year-end 2005. Betas calculated with respect to the world market over the Jan/96-Dec/05 period. Volatility measured by the standard deviation of returns over the Jan/96-Dec/05 period, annualized. Correlation between Argentina's stock market and bond market estimated over the Jan/96- Dec/05 period