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While you were visiting London, you purchased a Jaguar for £35,000, payable in three months. You have enough cash at your bank in New York City, which pays 0.35% interest per month, compounding monthly, to pay for the car. Currently, the spot exchange rate is $1.45/£ and the three-month forward exchange rate is $1.40/£. In London, the money market interest rate is 2.0% for a three-month investment.
There are two alternative ways of paying for your Jaguar.
(a) Keep the funds at your bank in the U.S. and buy £35,000 forward.
(b) Buy a certain pound amount spot today and invest the amount in the U.K. for three months so that the maturity value becomes equal to £35,000.
Evaluate each payment method. Which method would you prefer? Why?
El Capitan Foods has a capital structure of 40% debt and 60% equity, its tax rate is 35%, and its beta (leveraged) is 1.15. Based on the Hamada equation, what would the firm's beta be if it used no debt, i.e., what is its unlevered beta?
Compute the realized rate of return for investors who purchased the bonds when they were issued and who surrender them today in exchange for the call price. Is the realized yield higher or lower than the promised yield?
Your car dealer is willing to lease you a new car for $389 a month for 60 months. Payments are due on the first day of each month starting with the day you sign the lease contract. If your cost of money is 4.9 percent, what is the current value of..
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examine the industry average ratios for the auto parts industry and then compare them to parts inc. a fictional
Student A is considering to finance her college education by selling programs at the football games for school. There is a fixed cost of $400 for printing these programs, and the variable expense is $3.00.
Past year Murphy Transportation had $5 million of sales, and it had $1.7 million of fixed assets that were being operated at 80 percent of capacity.
Given that ABC stock has a required or expected rate of return of 15%, the average market return is 11% and the interest yield on 10-year US Treasury Bonds is 4%, should the investor purchase ABC? Show your work to explain why or why not.
Summarize an article (or series of articles) regarding the country risk engaged by an MNC during the past five years. What key concepts from the assigned reading apply?
Future value of annuity problem. You deposit $8,000 into a retirement account at the end of the next 12 years earning 10% interest, what is the future value of your retirement after 12 years?
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