Capitalist holding major stake in an e-commerce

Assignment Help Financial Management
Reference no: EM131064680

Suppose you are a British venture capitalist holding a major stake in an e-commerce start-up in Silicon Valley. As a British resident, you are concerned with the pound value of your U.S. equity position. Assume that if the American economy booms in the future, your equity stake will be worth $1,000,000, and the exchange rate will be $1.40/£. If the American economy experiences a recession, on the other hand, your American equity stake will be worth $500,000, and the exchange rate will be $1.60/£. You assess that a boom and a recession are equally likely to happen. Estimate your exposure to the exchange risk (i.e., find the coefficient b)

Reference no: EM131064680

Questions Cloud

Calculate the cost of capital for each level of debt : Assuming the company chooses a capital structure which minimizes its cost of capital, based on your values calculated, what percentage of debt and equity whould it use? What is the associated cost of capital?
The covariance between the two stocks : Suppose you invest $7,000 in Stock A and $3,000 in Stock B. The variance of Stock A is 50 percent, the variance of Stock B is also 50 percent, and the covariance between the two stocks is 0 percent. What is the variance of your portfolio in percent?
What are the economic implications of this action : What are the economic implications of this action in the labor markets? Use graphs as needed and explain your answers thoroughly.
What is the annual loan payment : Jackson Electric Company has borrowed $27,850 from its bank at an annual rate of 8.5 percent. The company plans to repay the loan in eight equal installments. What is the annual loan payment?
Capitalist holding major stake in an e-commerce : Suppose you are a British venture capitalist holding a major stake in an e-commerce start-up in Silicon Valley. As a British resident, you are concerned with the pound value of your U.S. equity position. You assess that a boom and a recession are equ..
New supermarkets is major capital budgeting project : Opening a series of new supermarkets is a major capital budgeting project for the company. Describe and discuss the main items on the income statement and balance sheet that you think will be impacted by this new undertaking. Explain why you chose th..
Plan to start saving for retire : You plan to start saving so you can retire in 40 years. After retirement, you expect to live 20 years. You wish to be able to withdraw $50,000 per year at the end of every year for the 20 years during your retirement. What is the dollar amount you ne..
What will be the value of the bond when until maturity : You own a 5-year bond with a face value of $1,000 and a coupon rate of 10 percent with annual payments. The bond is currently worth $1,216.47. If market interest rates remain unchanged, what will be the value of the bond when there are only 3 years l..
Widely known stock market index : Which of the following is not a widely known stock market index?

Reviews

Write a Review

Financial Management Questions & Answers

  What is the intrinsic value of a share of stock

The risk-free rate of return is 7.5%, the expected rate of return on the market portfolio is 14%, and the stock of Xyrong Corporation has a beta coefficient of 2.8. Xyrong pays out 40% of its earnings in dividends, and the latest earnings announced w..

  What is its required return

Paccar’s current stock price is $48.20 and it is likely to pay a $0.80 dividend next year. Since analysts estimate Paccar will have an 8.8 percent growth rate, what is its required return?

  About the electric driven compressor

At NYIT in 1993 a 100ton electric A/C system (electric driven compressor) with a 100ton natural gas absorption system. Electric then was $.12/kwh and the natural gas unit was expected to half the energy cost.

  Whats the market risk premium

A stock has a beta of 1.2. The risk free rate is 5.1% and market return is 13.6%. What’s the market risk premium? What's the expected return of the stock under CAPM?

  Improving the organizations financial position

Identify at least three objectives for improving the organization's financial position and show how they relate to the mission, vision, and strategy of the organization.

  Social security income-on other taxable or tax-free income

A 68 year old taxpayer has $20,000 in social security income and on other taxable or tax-free income, how much of the social security income must the taxpayer include in taxable income?

  Calculate the breakeven revenue for a new groupon customer

A local dental practice decides to run a Group on campaign. The campaign offered $345 worth of dental services (such as teeth whitening) for $150. For the total campaign, 250 coupons were sold. We estimate that 85% of the coupons will be redeemed, th..

  What is the after-tax cash flow from the sale of this asset

Consider an asset that costs $730,000 and is depreciated straight-line to zero over its eight- year tax life. The asset is to be used in a five-year project. If the relevant income tax rate is 40 percent, and the capital gains rate is 20 percent, wha..

  Effective interest rate of loan and the stated interest rate

Explain the difference, if any, between the effective interest rate of a loan and the stated interest rate. How do lenders safeguard against loans secured by accounts receivable? What are some of the common methods for banks to increase their return ..

  Determine the beta coefficient for stock

Given the following information, determine the beta coefficient for Stock J that is consistent with equilibrium: rJ = 12.75%; rRF = 5.7%; rM = 13%. Round your answer to two decimal places.

  Correlation coefficient between stocks

Security A has an expected return of 12% with a standard deviation of 32%. Security B has an expected return of 18% with a standard deviation of 59%. The correlation coefficient between Stocks A and B is 0.4. What is the standard deviation, in percen..

  Before-tax cost of debt and after-tax cost of debt

Before-tax cost of debt and after-tax cost of debt: David Abbot is interested in purchasing a bond issued by Sony. He has obtained the following information on the security.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd