Compute the net present value of the photoelectric inspection equipment in: a.) Pesetas, by discounting peseta cash
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Question:
Compute the net present value of the photoelectric inspection equipment in: a.) Pesetas, by discounting peseta cash flows at a peseta discount rate; and b.) dollars, by translating future peseta cash flows into dollars at expected future spot exchange rates. Merck's dollar hurdle rate for a project of this type was 13%. Assume that at the time of the analysis, annual inflection was expected to be 8% in Spain and 4% in the United States.
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