You work for a U.S.-based firm that is considering constructing a manufacturing plant in Mexico. The construction costs are expected to be 100 million Mexican pesos. Your firm intends to leave the plant open for three years. During the three years of operation, cash flows are expected to be 30 million pesos, 30 million pesos, and 20 million pesos, respectively. Operating cash flows will begin one year from today and are remitted back to the parent at the end of each year. At the end of the third year, your company expects to sell the plant for 50 million pesos. Your company estimates that an appropriate discount rate for this project is 20%. The current exchange rate is $0.05.

1. Determine the NPV for this project assuming that your firm expects the peso to remain constant over the life of the project?
2. Determine the NPV for this project assuming that your firm expects the peso to appreciate by 10% per year over the life of the project?