Question

# 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

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

 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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