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Loans and interest rates

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HW for Corporate Finance;31. BE SURE TO SHOW AND LABEL ALL COMPUTATIONS IN THE SPACE BELOW. ALSO, BE SURE TO PROVIDE THE UNIT OF MEASURE OF THE ANSWER ($, EUROS, % ETC). FAILURE TO DO SO WILL RESULT IN A DEDUCTION OF POINTS. 7 POINTS;Assume Willy Corporation, a U.S.-based MNC, obtains a one-year loan of 1,500,000 Malaysian ringgit (MYR) at a nominal interest rate of 7%. At the time the loan is extended, the spot rate of the ringgit is $.25. The spot rate of the ringgit in one year is $.28.;A. What is the dollar amount initially obtained from the loan?;B. What is the dollar amount needed to repay the loan?;32. BE SURE TO SHOW AND LABEL ALL COMPUTATIONS IN THE SPACE BELOW. ALSO, BE SURE TO PROVIDE THE UNIT OF MEASURE OF THE ANSWER ($, EUROS, % ETC). FAILURE TO DO SO WILL RESULT IN A DEDUCTION OF POINTS. 7 POINTS;American Company has a unique opportunity to invest in a two-year project in Australia. The project is expected to generate 1,000,000 Australian dollars (A$) in the first year and 2,000,000 Australian dollars in the second. American would have to invest $1,500,000 in the project. American s has determined that the cost of capital for similar projects is 14%. What is the net present value of this project if the spot rate of the Australian dollar for the two years is forecasted to be $.55 and $.60, respectively?;33. BE SURE TO SHOW AND LABEL ALL COMPUTATIONS IN THE SPACE BELOW. ALSO, BE SURE TO PROVIDE THE UNIT OF MEASURE OF THE ANSWER ($, EUROS, % ETC). FAILURE TO DO SO WILL RESULT IN A DEDUCTION OF POINTS. 7 POINTS;Jones Ltd.. will receive SF2,000,000 in 30 days. Use the following information to determine the total;dollar amount received (after accounting for the option premium) if the firm purchases and exercises;a put option;Exercise price = $.61;Premium = $.02;Spot rate = $.60;Expected spot rate in 30 days = $.56;30?day forward rate = $.62;34. BE SURE TO SHOW AND LABEL ALL COMPUTATIONS IN THE SPACE BELOW. ALSO, BE SURE TO PROVIDE THE UNIT OF MEASURE OF THE ANSWER ($, EUROS, % ETC). FAILURE TO DO SO WILL RESULT IN A DEDUCTION OF POINTS. 7 POINTS;Wilson Ltd. Corporation will need to purchase 200,000 British pounds in 90 days. A call option;exists on British pounds with an exercise price of $1.68, a 90?day expiration date, and a premium of;$.04. A put option exists on British pounds, with an exercise price of $1.69, a 90?day expiration date;and a premium of $.03. Wilson plans to purchase options to cover its future payables. It;will exercise the option in 90 days (if at all). It expects the spot rate of the pound to be $1.76 in 90;days. Determine the amount of dollars it will pay for the payables, including the amount paid for the;option premium.;35. BE SURE TO SHOW AND LABEL ALL COMPUTATIONS IN THE SPACE BELOW. ALSO, BE SURE TO PROVIDE THE UNIT OF MEASURE OF THE ANSWER ($, EUROS, % ETC). FAILURE TO DO SO WILL RESULT IN A DEDUCTION OF POINTS. 7 POINTS;MNC Corporation has a beta of 1.86. The risk-free rate of interest is 3%, and the return on the stock market overall is expected to be 11%. What is the required rate of return on MNC stock?;36. BE SURE TO SHOW AND LABEL ALL COMPUTATIONS IN THE SPACE BELOW. ALSO, BE SURE TO PROVIDE THE UNIT OF MEASURE OF THE ANSWER ($, EUROS, % ETC). FAILURE TO DO SO WILL RESULT IN A DEDUCTION OF POINTS. 7 POINTS;Assume the following information;U.S. deposit rate for 1 year;=;11%;U.S. borrowing rate for 1 year;=;12%;Swiss deposit rate for 1 year;=;8%;Swiss borrowing rate for 1 year;=;10%;Swiss forward rate for 1 year;=;$.40;Swiss franc spot rate;=;$.39;Also assume that a U.S. exporter denominates its Swiss exports in Swiss francs and expects to receive SF600,000 in 1 year.;Using the information above, what will be the approximate value of these exports in 1 year in U.S. dollars given that the firm executes a forward hedge?;37. BE SURE TO SHOW AND LABEL ALL COMPUTATIONS IN THE SPACE BELOW. ALSO, BE SURE TO PROVIDE THE UNIT OF MEASURE OF THE ANSWER ($, EUROS, % ETC). FAILURE TO DO SO WILL RESULT IN A DEDUCTION OF POINTS. 7 POINTS;Identify and discuss the factors which should be considered in determining the discount rate for evaluating potential international investments. Discuss why each of these factors is important in this regard. Provide authoritative support for your answer.;38. BE SURE TO SHOW AND LABEL ALL COMPUTATIONS IN THE SPACE BELOW. ALSO, BE SURE TO PROVIDE THE UNIT OF MEASURE OF THE ANSWER ($, EUROS, % ETC). FAILURE TO DO SO WILL RESULT IN A DEDUCTION OF POINTS. 7 POINTS;Assume your firm needed to borrow $500,000,000 on June 30, 2010 for 1 year for a project in the Bahamas. Your firm is credit-worthy and can borrow U.S. $ at the WSJ Prime Rate + 1.5%. You also have the option of borrowing from sources in the Bahamas. However, your firm?s policy is to borrow in a foreign currency only if the forecasted effective cost of financing is at least 2 percentage points less than the U.S. interest rate.;Assume a fixed rate loan for the 1 year period.;You can easily find the WSJ Prime Rate on June 30, 2010 from various online sources.;The following websites will provide you with the interest rates and currency spot rates.;Interest Rates;HYPERLINK "http://data.worldbank.org/indicator/FR.INR.LEND" t "_self" http://data.worldbank.org/indicator/FR.INR.LEND;Exchange Rates;HYPERLINK "http://www.oanda.com/currency/historical-rates/" t "_self" http://www.oanda.com/currency/historical-rates/;The website with the interest rates contains a statement that terms and conditions vary by country and this can affect the rate actually charged. Ignore this as we do not have access to that level of data.;Your firm decided to borrow the funds in the Bahamas. After the fact, was this a wise decision considering the firm?s policy about borrowing from foreign sources? Show the calculations to support your answer.;39. BE SURE TO SHOW AND LABEL ALL COMPUTATIONS IN THE SPACE BELOW. ALSO, BE SURE TO PROVIDE THE UNIT OF MEASURE OF THE ANSWER ($, EUROS, % ETC). FAILURE TO DO SO WILL RESULT IN A DEDUCTION OF POINTS. 7 POINTS;A firm forecasts the ruble?s value as follows for the next year;Possible;Percentage Change Probability;?3% 20%;4% 30%;7% 50%;The annual interest rate on rubles is 7%. What is the value of the effective financing rate from a U.S. firm?s perspective?;40. BE SURE TO SHOW AND LABEL ALL COMPUTATIONS THE SPACE BELOW. ALSO, BE SURE TO PROVIDE THE UNIT OF MEASURE OF THE ANSWER ($, EUROS, % ETC). FAILURE TO DO SO WILL RESULT IN A DEDUCTION OF POINTS. 7 POINTS;Assume that BCW, Inc. is considering the establishment of a subsidiary in Norway. The initial investment required by the parent is $5,000,000. If the project is undertaken, BCW would terminate the project after four years. BCW cost of capital is 13%, and the project is of the same risk as BCW's existing projects. All cash flows generated from the project will be remitted to the parent at the end of each year. Listed below are the estimated cash flows the Norwegian subsidiary will generate over the project's lifetime in Norwegian kroner (NOK);Year 1;Year 2;Year 3;Year 4;NOK10,000,000;NOK15,000,000;NOK17,000,000;NOK20,000,000;The current exchange rate of the Norwegian kroner is $.135. BCW?s exchange rate forecast for the Norwegian kroner over the project's lifetime is listed below;Year 1;Year 2;Year 3;Year 4;$.13;$.14;$.12;$.15;What is the net present value of the Norwegian project?;Additional Requirements;Level of Detail: Show all work

 

Paper#18268 | Written in 18-Jul-2015

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