Project information for your firm ABC

- will export product to mexico and is looking for a firm to swap pesos with over the life of the project

- time period for the project is 4 years

- after tax cash flow is expected to be 1,000,000 pesos

- Peso spot rate is $0.20

- Risk free annual interest rates: US 6 percent, Mexico 11 Percent

- Inbterest rate parity exists

- use one year one year forward rate as predictor of exchange rate in one year

- exchange rates will change by the same percentage predicted for year one in years 2-4

- Firm XYZ will take the 1,000,000 pesos each year at an exchange rate of $0.17 per peso

- ignore taxes

ABCs Details:

Capital structure	60 percent debt and forty percent equity
Corp. Tax Rate	30 percent
debt financing cost	10 percent
US expected stock returns	18 percent
Beta	0.9

- ABC will use its cost of capital as required return on project

Determine the NPV if ABC enters into a swap agreement with XYZ and does not hedge its position. Please show detailed calculations.