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Group Televisa is a mexican firm in mexico with american depository receipt ADR traded on NYSE. The stock prices are 300 pesos in Mexico and 30 dollars in New York; the exchange rate is 10 pesos per dollar. Suddenly, a political problem in Mexico leads to a depreciation of the peso and a drop in mexican stock market. The new exchange rate is 11 pesos per dollar, and the new stock price of grupo televisa is 275 pesos. What should the price quoted in New York be? Choices: $22.50, $25, $26, 75, or $27
What is an opportunity cost rate and how is this rate used in time value analysis - Is this rate a single number that is used in all situations?
Explain the problem of using a firm-wide weighted average cost of capital for individual projects AND explain how you would estimate the discount rate for these projects.
Mortgage-backed securities
The capital asset pricing model approach to equity valuation:
Colins Company current return on equity (ROE) is 16%. It pays out one-quarter of earnings as cash dividends. Current book value per share is $35. The company has 5 million shares outstanding. What is the terminal value? What is the current value of C..
Shawhan Supply plans to maintain its optimal capital structure of 30 percent debt, 20 percent preferred stock, and 50 percent common stock far into the future. The required return on each component is: Debt (10 percent), preferred stock (11 percent),..
Erna Corp. has 8 million shares of common stock outstanding. The current share price is $73, and the book value per share is $7. Erna Corp. also has two bond issues outstanding. Suppose the most recent dividend was $4.10 and the dividend growth rate ..
A stock you are buying today promises no dividends for a long time. In exactly 10 years, you expect the stock will pay its first annual dividend of $1.90. At that time, you also believe the stock could be sold for $41.00. If today you can buy the sto..
The Newton Company has 125,000 shares of stock that each sell for $70. Suppose the company issues 10,000 shares of new stock at the following prices: $70, $55, and $50. What is the effect of each of the alternative offering prices on the existing pri..
Unsophisticated capital budgeting techniques do not: a. examine the size of the initial outlay b. take into account unconventional cash flow patters c. explicitly consider the time value of money d. use net profits as a measure of return
Assume you are a financial manager of a firm that sells most of its product on credit and also buys much of its raw materials on credit. Explain the importance of your credit standards that you extend to your customers. What are the options available..
Massachusetts Burger is a national chain that, because of its success, has decided to expand. MassBurger, as it’s also known, is currently unlevered and has assets valued at 2000000. What must the percentage fall in the assets be before all the equit..
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