Q1)Accounting for Uncertain Cash Flows Blustream, Inc., considers a project in which it will sell the use of its technology, to firms in Mexico. It already has received orders from Mexican firms that will gen-erate 3 million Mexican pesos (MXP) in revenue at the end of the next year. However, it might also receive a contract to provide this technology to the Mexican government. In this case, it will generate a total of MXP5 million at the end of the next year. It will not know whether it will receive the government order until the end of the year. Today's spot rate of the peso is $.14. The 1-year forward rate is $.12. Blustream expects that the spot rate of the peso will be $.13 1 year from now. The only initial outlay will be $300,000 to cover development expenses (regardless of whether the Mexican govern- ment purchases the technology). Blustream will pursue the project only if it can satisfy its required rate of return of 18 percent. Ignore possible tax effects, It decides to hedge the maximum amount of revenue that it will receive from the project.

1. Determine the NPV if Blustream receives the gov ernment contract.
2. If Blustream does not receive the contract, it will have hedged more than it needed to and will offset the excess torward sales by purchasing pesos in the spot market at the time the forward sale is executed. Determine the NPV of the project assuming that Blustream does not receive the government contract.

3. Now consider an alternative strategy in which Blu- stream only hedges the minimum peso revenue that it will receive. In this case, any revenue due to the gov- ernment contract would not be hedged. Determine the PV based on this alternative strategy and assume that Blustream receives the government contract.

4. If Blustream uses the alternative strategy of only hedging the minimum peso revenue that it will receive, determine the NPV assuming that it does not receive the government contract.

5. If there is a 50 percent chance that Blustream will receive the government contract, would you advise Blu- stream to hedge the maximum amount or the minimum amount of revenue that it may receive? Explain.

6. Blustream recognizes that it is exposed to exchange rate risk whether it hedges the minimum amount or the maximum amount of revenue it will receive. It considers a new strategy of hedging the minimum amount it will receive with a forward contract and hedging the additional revenue it might receive with a put option on Mexican pesos. The 1-year put option has an exercise price of S.125 and a premium ot $.01. Determine the NPV if Blustream uses this strategy and receives the government contract. Also, determine the NPV if Blustream uses this strategy and does not receive the government contract. Given that there is a 50 percent probability that Blustream will receive the government contract, would you use this new strategy or the strategy that you selected in question (e)?

7. Please anwser it with stpes and forumla and show works without using excel please please