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Assume the following information for Bruma 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 = 1.2
Expected U.S. market return = 10%
U.S. corporate tax rate = 30%
German corporate tax rate = 40%
What is Bruma's after-tax cost of dollar-denominated debt?
If an investor puts one-fourth of his wealth in A and three-fourths in B, what is the expected return and risk (standard deviation) of this portfolio?
What is the Marginal Rate of Return? What are the Alternatives to Disposition? What is Portfolio Balancing?
Bill Williams has opportunity to invest in project A that costs 5500 today and promises to pay annual cash flows of 2200, 2600,2600, 1900, 1800 over the next 5 years. How long will it take bill to recoup his initial investment in project.
To offset your overhead, you want to charge your customers an EAR (or EFF%) that is 2% more than the bank is charging you. - What APR rate should you charge your customers?
An investor deposits $2000 per year for 10 years in a 4% interest bearing account. The last cash flow is received 1 year prior to the end of the tenth year. What is the investor's future balance after 10 years?
The U.S. three-month interest rate (unannualized) is 2%. The Canadian three-month interest rate (unannualized) is 3%. Assume interest rate parity exists. The expected inflation over this period is 5% in the U.S. and 3% in Canada. Determine the dollar..
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What are the main differences and similarities between managing a municipal bond fund and a taxable corporate bond fund?
Suppose policy makers pass a budget that result in an increase in the budget deficit. Also assume that this fiscal policy action results in a reduction in the saving rate. To what extent will this reduction in the saving rate because permanent change..
Diversification occurs when stocks with low correlations of returns are placed together in a portfolio. Identify at least one type of firm that might exhibit low correlations of returns with the overall stock market? Explain why the correlations of t..
The incorporation of triple bottom line principles in work planning is a move many organisations have made. Explain the concept of triple bottom line principles.
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