You have estimated the cash flows in pesos from a project in Switzerland and also the dollar-based cost of capital for the project.To compute the project NPV in dollars,you now need to compute the:
A) current spot rate only.
B) opportunity cost of capital measured in terms of the foreign currency.
C) implied forward exchange rate for each year in which the project has cash flows.
D) actual spot rates for each year in which the project has cash flows.

Question

Quizplus · Accepted Answer

To compute the NPV in dollars, you need to convert future cash flows from pesos to dollars using the implied forward exchange rate for each year, which accounts for expected changes in exchange rates over time.

You Have Estimated the Cash Flows in Pesos from a Project