QUESTION 1 Annie invests $3.0 million in a mining venture in Mexico without hedging. The current spot rate is $0.08/MXP. The on-going concern has generated free cash flows of MXP21 million per year. Ex-post the cash inflows are equal to the expected MXP21 per year, and the spot rates one, two, and three years hence are $0.0748, $0.0662, and $0.0587. What would be her USD cash inflow for the first year? $1,519,200 $1,678,900 $1,570,800 $1,517,000 $1,560,000 QUESTION 2 What is her USD cash inflow for the second year? $1,228,100 $1,599 100 $1,444,000 $1,306,400 QUESTION 3 What is her USD cash inflow for the third year? $1,232,700 $1,190,400 $1,314,000 $1,230,200 $1,306,200 QUESTION 4 What is the realized NPV if she requires a rate of return of 20 percent in USD. $140,000 133,789 95,667 -12,215 146,123 QUESTION 5 If instead she hedged with forward contracts, what would be the forward rate for the first year, if interest rates on one-year government securities in the US and Mexico are 0%, and 5%, respectively? $0.0762 0.0790 0.0629 0.0602 0.0598 QUESTION 6 What would be the forward rate for the second year, if interest rates on two-year government securities in the US and Mexico are 1%, and 9%, respectively? $0.0562 0.0690 0.0629 0.0687 0.0698