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Problem 1 - One area in which you are assisting is in the setup of business development in Central and South America for Navigation Systems, Inc. (NSI). The firm has negotiated the framework of supplying $40 million per year (in U.S. dollars) in navigations systems for Auxiliary Aircraft in Brazil for 10 years. If the products are manufactured in the United States and delivered to Brazil, then there will be a 5% import tariff on $40 million in product. As an alternative, the Brazilian government has offered to pay for all costs associated with building and locating a manufacturing plant in Brazil to build the product. Auxiliary Aircraft would pay an additional 15%, making annual sales $46 million (in U.S. dollars), and no tariff would be levied.Answer the following questions about this situation:Does any currency exchange rate risk exist? Why?What is a tariff? How is it implemented and collected?Also respond to the vice president of business development's request for the following:the total amount of money NSI would receive from each scenario? a report on what effect the Free Trade Agreement of the Americas (FTAA) or the possible regional integration, like Mercosur, would have on each scenario? your thoughts about any other factors that would affect either scenario? Problem 2- Navigation Systems Inc. now has total worldwide revenues of over $500 million forecast for this coming year. You have operations in the United States of $300 million with a 10% ROS (return on sales, which is the same as net income on an income statement); operations in Germany of €100 million with an ROS of 12%; and operations in Shanghai, China of 650 million Yuan with an ROS of 8%. You expect to repatriate all the ROS to the United States when available in 12 months.At your supervisor's request, do the following:Determine the spot and 12-month forward exchange rates, and determine any change in the ROS repatriated in 12 months based on exchange rates versus the current forecast.Describe the repatriation using each of the following:a spot transactionan outright forwarda foreign-exchange swapWould there be any use or benefit in using a currency option or currency swaption? Describe each.Be sure to consider any U.S. corporate taxes that may be due and also whether there are any tax holidays in effect that may alter the taxes due on repatriation of the profits.How would you advise the company to handle the repatriation?
Kolby’s Korndogs is looking at a new sausage system with an installed cost of $910,000. This cost will be depreciated straight-line to zero over the project’s seven-year life, at the end of which the sausage system can be scrapped for $105,000. What ..
Preston Inc.'s stock has a 25% chance of producing a 30% return, a 50% chance of producing a 12% return, and a 25% chance of producing a -18% return. What is the firm's expected rate of return?
In many business decision scenarios, managers faces the dilemma, for example, whether to continue the project or to abandon it, whether to finance a project with debt or equity, etc. How can we apply the knowledge of traditional option pricing techni..
Dinklage Corp. has 5 million shares of common stock outstanding. The current share price is $71, and the book value per share is $6. The company also has two bond issues outstanding. The first bond issue has a face value of $65 million, a coupon of 6..
According to Smith, social harmony comes from economic exchanges in which people act. Which one of the following is a role for government that Smith saw as essential? The division of labor tends to be greatest in less economically developed countrie..
An investor is interested in acquiring an appliance marker with an all equity transaction. The 10 years Treasury Note is at 3.12% The 3 month T-bills is currently at 0.4% The industry is 150% riskier than the general market while S&P index has been r..
If you want to take out a 30 year, $250,000.00 mortgage at 5.5% with 2 points. calculate your monthly principal and interest payment?. what is the APR and EAR (actual/true/effective rate of interest) on the loan? Show work
Assume that the 6 month interest rate is 2%, and a 6 month $1050 stick call costs $71.802 and a 6 month $1050 strike put costs $101.214 on the S&T index. Suppose you buy a 1050 strike straddle. Determine the profit if the index is at $1150 in 6 month..
List at least five human capital management problems at AGC. Leadership styles and their impact on organizational cultures. How will you measure the effectiveness of the plan?
Douglas Keel, a financial analyst for Orange Industries, wishes to estimate the rate of return for two similar-risk investments, X and Y. Douglas’s research indicates that the immediate past returns will serve as reasonable estimates of future return..
What is the value of a perpetuity that pays $100 every 6 months forever? The discount rate quoted on an APR basis is 6.5%.
The company had paid a regular cash dividend to its stockholders for over 50 years. In its most current operating year, the company experienced a severe cash flow crisis and would be unable to pay its dividend without having to borrow the money.
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