Drysdale Co. (a U.S. firm) is considering a new project that would result in cash flows of

Question:

Drysdale Co. (a U.S. firm) is considering a new project that would result in cash flows of 5 million Argentine pesos in one year under the most likely economic and political conditions. The spot rate of the Argentina peso in one year is expected to be $.40 based on these conditions. However, it wants to also account for the 10% probability of a political crisis in Argentina, which would change the expected cash flows to 4 million Argentine pesos in one year. In addition, it wants to account for the 20% probability that the may only be $.36 at the end of one year. These two forms of country risk are independent. Drysdale's required rate of return is 25% and its initial outlay for this project is $1.4 million. Show the of possible outcomes for the project's (NPV).
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