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Omega Industries, a U.S MNC, is contemplating making a foreign capital expenditure in SA. The initial cost of the project is ZAE10000. The annual cash flows over the five year economic life of the project in ZAR are estimated to be 3000, 4000, 5000, 6000 and 7000. The parent firm's cost of capital in dollars is 9.5 percent. Long run inflation is forecasted to be 3 percent per annum in the U.S and 7 percent in SA. The current spot foreign exchange rate is ZAR/USD = 3.75. Determine the NPV for the project in USD by:
a) Calculating the NPV in ZAR using the ZAR equivalent cost of capital according to the Fischer Effect and the converting to USD at the current spot rate
b)Converting all cash flows from ZAR to USD at purchasing power parity forecast exchange rates and then calculting the NPV at the dollar cost of capital.
c) What is the NPV in dollars if the actual pattern of ZAR/USD exchange rate is: S(0) = 3.75, S(1) = 5.7, S(2) = 6.7, S(3) = 7.2, S(4) = 7.7, and S(5) = 8.2?
Crypton Electronics has a capital structure consisting of 44% common stock and 56% debt. A debt issue of $1000 par value, 5.6% bonds that mature in 15 years and pay annual interest will sell for $979.
Dick and Jane (and their dog Spot) have just purchased a house and are calculating how much money they will need when the closing day rolls around. The purchase price is $150,000.
Your finance text book sold 47,500 copies in its first year. The publishing company expects the sales to grow at a rate of 23.0 percent for the next three years, and by 6.0 percent in the fourth year.
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Objective and multiple choice questions on Financial Econometrics responsible for creating financial statements.
The present value of a payment of 60 at the end of 10 years and 40 at the end of 20 years is equal to 40. The present value of a perpetuity with payments of x at the end of each year is also 40.
Walther Enterprises has accounts receivable of $52,700, total assets of $269,250, cost of goods sold of $147,900 and a capital intensity ratio of 1.25. What is the accounts receivables turnover rate
Mary Watson is 24 years old and single, lives in an apartment, and has no dependents. Last year she earned $45,000 as a sales assistant for Focused Business Analytics: $3,910 of her wages was withheld for federal income taxes.
The Pinkerton Publishing Company is considering two mutually exclusive expansion plans. Plan A calls for the expenditure of $50 million on a large-scale, integrated plant that will provide an expected cash flow stream of $8 million per year for 20..
If Roten Rooters, Inc., has an equity multiplier of 1.51, total asset turnover of 1.30, and a profit margin of 6.1 percent, what is its ROE
Underwriters have informed Taussig's management that it must price th enew issue to the public at $27.53 per share to ensure that all shares will be sold.
You deposit 5,000 into a retirement fund at the end of each year for the next 20 years at 5% effective annual interest rate. With that accumulated fund, you then purchase a 35-year annuity-immediate
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