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Suppose that The United States and Japan only produce one good – Roller Skates. Further, assume that Japanese produced roller skates and American roller skates are identical in every way.
a) If the American price of roller skates is $40 and the Japanese price of roller skates is 4,300 Yen, what should the USDJPY exchange rate be?
b) Now, suppose that it costs $5/pair to ship roller skates from the US to Japan. Within what range could the nominal exchange rate fluctuate without creating an arbitrage opportunity in roller skates?
Suppose a project costs 200,000 today, 100,000 next year and 15000 to dispose of it in ten years when the project is discontinued. Once finished three years from today, it is expected to generate a net income of 40000 per year until it is discontinue..
When we consider taking venture capital to finance our business, we discover that venture capital firms require very high rates of return on their investment. Rates between 40% and 50% percent are not uncommon. Why is it that venture capital firms n..
Your child will go to college 10 years from now and will require $12,000 at the beginning of each year for 4 years. At the end of their fourth year of college you plan on buying them a new car as a graduation present. The car will cost $23,000. how m..
Super Sonics Entertainment is considering buying a machine that costs $660,000. The machine will be depreciated over four years by the straight-line method and will be worthless at that time. The company can lease the machine with year-end payments o..
Compute the yield to maturity on the old issue and use this as the yield for the new issue. - Make the appropriate tax adjustment to determine the aftertax cost of debt.
If you own 500 shares of Alaska Air at $59.68, 550 shares of Best Buy at $68.12, and 300 shares of Ford Motor at $9.21, what are the portfolio weights of each stock? Portfolio weights Alaska Air Best Buy Ford Motor.
Valley Flights, Inc. has a capital structure made up of 40% debt and 60% equity and a tax rate of 30%. A new issue of $1,000 par bonds maturing in 20 years can be issued with a coupon of 9% at a price of $1,098.18 with no flotation costs. Flotation c..
A project in Hong Kong costs Hong Kong dollar (HKD) 200,000 and produces cash flows of HKD 75,000 per year for five years. -estimate CHF cash flows, and calculate the project NPV in CHF.
An equally weighted portfolio consists of 46 assets which all have a standard deviation of 0.119. The average covariance between the assets is 0.08. Compute the standard deviation of this portfolio.
If the price is not fair, how could you capitalize on the arbitrage opportunity? What is the potential profit? Assume monthly compounding for borrowing and lending.
The expected return for the general market is 13.0%, and the risk premium in the market is 8.7%. Tasaco, LBM, and Exxos have betas of 0.818, 0.629, and 0.548, respectively. What are the appropriate expected rates of return for the three securities?
You purchased a machine for $1.06 million three years ago and have been applying straight-line depreciation to zero for a seven-year life. Your tax rate is 35%. If you sell the machine today (after three years of depreciation) for $779,000, what is y..
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