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Assume the following information for Pexi Co., a U.S.-based MNC that is considering obtaining funding for a project in Germany:
U.S. risk-free rate = 4%German risk-free rate = 5%Risk premium on dollar-denominated debt provided by U.S. creditors = 3%Risk premium on euro-denominated debt provided by German creditors = 4%Beta of project = 1.2Expected U.S. market return = 10%U.S. corporate tax rate = 30%German corporate tax rate = 40%
What is Pexi's cost of dollar-denominated equity?
a. 12.0%.
b. 11.2%.
c. 10.0%.
d. 7.2%.
Which of the following accounts is not affected when an account receivable written off as uncollectible is unexpectedly collected?
The Pickle construction division was working on one project for the 2012 fiscal year. They use the percentage of completion revenue recognition method.
Determine the tax consequences of a corporate reorganization.
The first installment payment of $18,360 was received on Dec. 31. How much gross profit from this sale should Pacer recognize on the December 31 income statement?
Of the remaining 80% (the credit sales), 60% are collected in the month of sale, with remaining 40% collected in the following month. What is the total cash collected (both from accounts receivable and for cash sales) in the month of January?
Which of the following is not one of the basic shareholders rights?
The firm uses the effective interest method of amortising discounts and premiums. The bonds were sold to yield an effective interest rate of 10%.
What factors should be considered in making an estimate of the loss accrual? What information should management disclose in the footnotes to the financial statements concerning this purchase commitment?
Calculate the average returns on small-company stocks and u.s. treasury bills. Calculate the variances and standard deviations of the returns on small-company stocks and u.s. treasury bills.
Jensen Company forecasts a need for 200,000 pounds of cotton in May. On April 11, the company acquires a call option to buy 200,000 pounds of cotton in May at a strike price of $0.3765 per pound for a premium of $814.
If the company decides to use 40% debt what is the new cost of equity? Note, the company's marginal tax rate is 35%. (Hint: calculate the levered beta and then re-calculate the cost of equity with that.)
Discuss in detail the requirements of incorporating the business, the advantages and disadvantages, and provide JJ with recommendations.
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