Question

**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

Your Answer:

**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

Your Answer:

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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