Groupe Ariel S.A. Case Study Help
(a) Net Cash Flows in PPP
As the exchange rate given as 15.99 which is gradually increasing over years by dividing per unit cost of material in France. So, the Net cash flows in PPP are calculated by dividing the net cash flows estimated in question 1 to the exchange rate MXN/ Euros’. The required NPV in Euros is estimated as $195,791.
(b) Difference
The estimated NPV in Peso’s is greater than the estimated NPV in Euro’s. The difference occurs in the inflation rate of both the countries. There is an evident relationship between both of the NPVs, depending on the basis of their Inflation Rate and Spot Rate.
(c)
The revised incremental cash flows in Pesos is estimated in the attached excel file by changing the inflation rate by 4%. The same procedure is followed as in part (f). The NPV is estimated as $218,902.
Change in exchange rate has been calculated by dividing per unit cost in Mexico and per unit cost in France. NPV has been calculated by using the same procedure, which is $126,090.
(b)
Net cash flows taken from question 1, exchange rate has been calculated by dividing per unit cost in Mexico and per unit cost in France.NPV has been calculated by using the same procedure, and the estimated NPV is $215,710...............................
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