Case | HBS Case Collection | April 2010

Groupe Ariel S.A.: Parity Conditions and Cross-Border Valuation

by Timothy A. Luehrman and James Quinn


Groupe Ariel evaluates a proposal from its Mexican subsidiary to purchase and install cost-saving equipment at a manufacturing facility in Monterrey. The improvements will allow the plant to automate recycling and remanufacturing of toner and printer cartridges, an important part of Ariel's business in many markets. Ariel corporate policy requires a discounted cash flow (DCF) analysis and an estimate for the net present value (NPV) for capital expenditures in foreign markets. A major challenge for the analysis is deciding which currency to use, the Euro or the peso. The case introduces techniques of discounted cash flow valuation analysis in a multi-currency setting and can be used to teach basic international parity conditions related to the value of operating cash flows.

Keywords: capital budgeting; Exchange rates; Securities analysis; Project evaluation; International Finance; Debt Securities; Currency Exchange Rate; Cash Flow; Cross-Cultural and Cross-Border Issues; Capital Budgeting; Europe; Mexico;


Luehrman, Timothy A., and James Quinn. "Groupe Ariel S.A.: Parity Conditions and Cross-Border Valuation." Harvard Business School Brief Case 104-194, April 2010.