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XCF Company wants to raise $9 million with debt financing to finance the entry into a foreign market. These funds are needed to finance working capital, and XCF will repay them with interest in one year. The company is considering three options:a) Borrowing U.S. dollars from a U.S. bank at 8% interest rateb) Borrowing British pounds from the Royal Bank of London at 10% interest ratec) Borrowing Euros from the Deutsche Bank in Frankfurt at 5% interest rateIf XCF borrows in foreign currency, they will have to convert it immediately in dollars at today’s spot rate. In one year’s time, they will have to pay back the bank in the currency they borrowed it plus interest. To do so, they will convert U.S. dollars using the spot rate in a year’s timeCurrently, the exchange rates are: 1 Euro = $1.50 and 1 British Pound = $2.00. The estimate of XCF’s CFO is that in one year, the British Pound will depreciate relative to the U.S. Dollar by 10% and the Euro will appreciate relative to the U.S. Dollar by 5%. From which bank should XCF borrow and why?
Immediately after the 4th payment at the end of the second year, interest rates have risen to 8% annually. You can earn that rate on funds already accumulated and the 16 future payents.
According to the pecking order theory of the capital structure, what percent of the project will be financed by debt?
Made-It common stock currently sells for $22.50 per share. The company's executive anticipate a constant growth rate of 10 percent and an end-of-year dividend of $2.
Evaluate the required return for an asset with a beta of .90 when the risk-free rate and market return are 6% and 10% respectively and fine the risk-free rate for a firm with a required return of 12% and a beta of 1.25
Tammie wants to buy a scooter that costs $3500. Her mom will loan her the money at 5% APR as long as she makes monthly payments over the next 3 years. How much will Tammie's monthly payment be?
You have just purchased a 10-year, $1,000 par value bond. The coupon rate on this bond is 8% annually. Interest will be paid at the end of each year. If you expect to earn a 10% nominal rate of return on this bond, how much should you have paid fo..
Jane is planning investing in three different stocks or creating three distinct two-stock portfolios. Jane considers herself to be a rather conservative investor.
Jim Evans has $45,000 invested in a stock with a beta of 0.8 and another $55,000 invested in a stock with a beta of 1.4. These are the only two investments in his portfolio. What is his portfolio's beta?
If bankruptcy costs and/or sharewholder under diversification are an issue, what measure of risk is relevant when evaluating project risk in capital budgeting.
The all-equity firm will have a value of $4 million and 400,000 shares outstanding. The leveraged firm will have 200,000 shares outstanding.
b. What are the profit variance, revenue variance, and cost variance?
1. A bond with 4% coupon rate (paid annually), 10 years to maturity, and $1000 face value.
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