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Question 4 (1 point) You are planning a trip to Paris. Your hotel will cost you...

Question 4 (1 point)

You are planning a trip to Paris. Your hotel will cost you €125 per night for 7 nights. You expect to spend another €650 for meals, tours, souvenirs, and so forth. How much will this trip cost you in U.S. dollars if €1 = $0.865? DO NOT USE DOLLAR SIGNS OR COMMAS IN YOUR ANSWER. ROUND ANSWER TO THE NEAREST DOLLAR

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Question 5 (1 point)

Your company is looking at a new project in Mexico. The project will cost 1,025,000 pesos. The cash flows are expected to be 400,000 pesos per year for 5 years. The current spot exchange rate is 19.07 pesos per dollar. The risk-free rate in the US is 4%, and the risk-free rate in Mexico 8%. The dollar required return is 10%. What is the net present value of this investment in U.S. Dollars? DO NOT USE DOLLAR SIGNS OR COMMAS IN YOUR ANSWER. ROUND ANSWER TO THE NEAREST CENT

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Answer #1
Cost in USD = Cost in Euros*Exchange rate
=(125*7 +650)*0.865
=$1,319.125
i.e. 1,319
Year 0 1 2 3 4 5
Cash flows in Peso -1025000 400000 400000 400000 400000 400000
Exchange rate as per Interesr rate parity 19.07 19.80346154 20.56513314 21.3560998 22.17748825 23.03046857
Cash flows in USD -53749.34452 20198.489 19450.39681 18730.01175 18036.30761 17368.29621
PVF 1 0.909090909 0.826446281 0.751314801 0.683013455 0.620921323
PV of cash flows -53749.34452 18362.26273 16074.70811 14072.13505 12319.04078 10784.34546
NPV 17863.1476
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