Your company is looking for a new project in Mexico. The project will cost 5,345,000 pesos. Cash flows are expected to be 2,442,000 pesos per year for 3 years. The current spot exchange rate is 20.7469 pesos per dollar. The risk-free rate in the US is 1.42% and the risk-free rate in Mexico is 3.57%. The required return in dollars is 13%. 

Should the company make the investment? 

Use the NPV method in relation to the foreign currency approach ( do not use the local currency approach) to evaluate the investment.

Answer rating: 100% (QA)

First lets calculate the present value factor for the required return in ... View the full answer