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Assessing economic exposure. Alhambra plc plans to create and finance a subsidiary in Argentina that produces computer components at a low cost and exports them to other countries. It has no other international business. The subsidiary will produce computers and export them to Africa and will invoice the products in pounds. The values of the currencies in Africa are expected to remain very stable against the pound. The subsidiary will pay wages, rent, and other operating costs in Argentine pesos. The subsidiary will remit earnings monthly to the parent.
a. Would Alhambra's cash flows be favourably or unfavourably affected if the Argentine peso depreciates over time?
b. Assume that Alhambra considers partial financing of this subsidiary with peso loans from Argentine banks instead of providing all the financing with its own funds. Would this alternative form of financing increase, decrease, or have no effect on the degree to which Alhambra is exposed to exchange rate movements of the peso?
Newnovetel cellular is issuing bonds pay no interest but can be converted into $9K at maturity in 17 years. To price them competitively, it was determined they should yield eight percent compounded annually. At what price should Newnovatel sell these..
Creating own dividend policy. Erik owns 2,000,000 shares of Wiseguy Entertainment. Wiseguy just declared a cash dividend of $0.05 per share. The stock is currently selling for $5.00. If Erik wants an annual “dividend income” of $50,000, $100,000, or ..
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discuss primary financial statements published by a corporation the various classifications used in a balance sheet the
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ABC Corp. mines copper, with ?xed costs of $0.60/lb and variable cost of $0.30/lb. The 1-year forward price of copper is $1.10/lb. The 1-year effective annual interest rate is 6.2%. If ABC Corp. does nothing to manage copper price risk, what is its p..
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Bayou Okra Farms just paid a dividend of $3.55 on its stock. The growth rate in dividends is expected to be a constant 6 percent per year indefinitely. Investors require a return of 14 percent for the first three years, a return of 12 percent for the..
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