Chapter Twenty-One. International Corporate Finance. Prepared by Anne Inglis, Ryerson University. Key Concepts and Skills. Understand how exchange rates are quoted and what they mean Know the difference between spot and forward rates
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Your company is looking at a new project in Mexico. The project will cost 9 million pesos. The cash flows are expected to be 2.25 million pesos per year for 5 years. The current spot exchange rate is 9.08 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 15%.