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Assume that US Co Inc has net receivables of CHF100,000 in 90 days. The spot rate of the franc is $.50, and the Swiss interest rate is 2 per cent over 90 days (not 2 per cent per annum).
Suggest how US Co Inc could implement a money market hedge.
Atlantic Northern Inc. pays an annual dividend rate of 8.00% on its preferred stock that currently returns 10.72% and has a par value of $100.00. What is the value of Atlantic Northern Inc.'s stock? Suppose, due to high inflation, interest rates rise..
Select the growth firm, the firm in danger of bankruptcy, and the firm that is the older firm expanding slowly. Explain your selection.
Assume there are only three stocks in the market: A, B, and C. At time 0, P(A) = $10, P(B) = $20, and P(C) = $10. At time 1, P(A) = $15, P(B) = $30, P(C) = $5. The number of shares outstanding is 1 million for A, 2 million for B, and 2 million for C...
You are a hedger who takes a long position in an oil futures contract on November 1, 2009 to hedge an exposure on March 1, 2010. The initial futures price is $50. On December 31, 2009 the futures price is $49. On March 1, 2010 it is $55. The contract..
Health Systems Inc. is considering a 10 percent stock dividend. What adjustments would have to be made to the capital accounts for a 10 percent stock dividend? Show the new capital accounts. How many shares would an investor have if he or she origin..
A company will pay a $5 per share dividend in 1 year. The dividend in 2 years will be $7 per share, and it is expected that dividends will grow at 5% per year thereafter. The expected rate of return on the stock is 13%. What is the current price of t..
Suppose the previously outlined projects work out on schedule for 2 years, but then O'Brien begins to experience extremely strong competition from Japanese firms. As a result, O'Brien's expected growth rate from 11% to zero. Assume that the dividend ..
Suppose that two factors have been identified for the U.S. economy: the growth rate of industrial production, IP, and the inflation rate, IR. IP is expected to be 2.5% and IR 2.6%. A stock with a beta of 2.7 on IP and 2 on IR currently is expected to..
Crypton Electronics has a capital structure consisting of 43% common stock and 57% debt. A debt issue of $1000 par value, 5.7% bonds that mature in 15 years and pay annual interest will sell for $974. Dividends have grown at the rate of 5.1% per y..
F. Pierce Products Inc. is considering changing its capital structure. F. Pierce currently has no debt and no preferred stock, but would like to add some debt to take advantage of low interest rates and the tax shield. Based on this information, what..
This planned expansion of the company's present activities would require an investment of $800,000 in equipment having an estimated service life of six years. He has estimated that the equipment could be sold for $40,000 at the beginning of the se..
Thalin Inc. has decided to extend its current product line. To finance the project, the firms is considering issuing a ten-year, 10-percent coupon bond. The firm has made public that its target debt-to-equity ratio is 30-percent is not going to chang..
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