An American firm has the opportunity to acquire a target company in Mexico. The firm

anticipates owning the subsidiary for $8$ years. Is this a profitable investment, and if so$,$

what is the projected NPV$?$

Initial Outlay $=200,000,000$ pesos

Cash Flow $($DF$)$: $50,000,000$ pesos at the end of Year $1,$ with Cash Flows increasing

$18\%$ each year

Required Rate of Return $($k$)=20\%$

Salvage Value $($SV$)=75,000,000$ pesos

Time at which target will be sold $($n$)=8$

Assume that we will bring half of the positive cashflow back to the U$.$S$.$ each year. At the end of

the $8$ years, all remaining cash will be converted back to U$.$S$.$ dollars. Assume exchange rates

as unfavorable as $23$ Pesos per dollar or as favorable as $17$ Pesos per dollar. Exchange rate is

$$Year Zero$$ is $20$ Pesos per dollar. Run a model or multiple models. Would you accept or

reject this takeover opportunity, and under what circumstances?