Question
The Boring Company, based in Houston, Texas, is considering making its first foreign expansion. It is considering a project in Mexico with an initial startup
The Boring Company, based in Houston, Texas, is considering making its first foreign expansion. It is considering a project in Mexico with an initial startup cost of 100 million pesos. Boring expects cash flows from the project of 35 million pesos per year for three years and a salvage value in three years of 40 million pesos. The current spot exchange rate is $0.10, and Boring anticipates the future exchanges rates will be $0.11 in one year, $0.12 in two years and $0.125 in three years. Boring's risk-adjusted discount rate for this project is 15%. What is the NPV of this project, and should the company accept it?
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