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1. The Chase Bank currency desk is showing a spot rate of NZD 1.65/USD today. If the estimated inflation rate is 2% in the U.S. and 5% in New Zealand, calculate the NZD/USD spot rate in one year’s time, assuming purchasing power parity holds true.
a) NZD 1.6029/USD
b) NZD 1.6985/USD
c) NZD 1.6830/USD
d) NZD 1.7325/USD
2. As a result of the EUR having appreciated by 12% against the USD, Audi, a German automaker, has decided to adjust the USD prices of its cars. Before the EUR appreciation, its A4 sedans were priced at USD 45,000. Calculate the new A4 price, assuming that Audi has decided to use a 60% pass-through.
a) USD 45,000
b) USD 72,000
c) USD 50,400
d) USD 47,160
e) USD 48,240
Zack's Inc., an all-equity firm, is subject to a 30% corporate tax rate. Its equityholders require a 20% return. The firm's market value now is $3,500,000, and there are 175,000 shares outstanding. Suppose the firm issues $1 million of bonds at 10% a..
Your firm has EBITDA of $10, depreciation of $2, interest expense of $2, and paid taxes of $1.50 this year. What is your firm’s free cash flow this year?
Percy Motors has a target capital structure of 30% debt and 70% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 11%, and its tax rate is 40%. Percy's CFO estimates that the company's WACC is 14.30%...
An investment project requires a net investment of $100,000. The project is expected to generate annual net cash inflows of $25,000 for the next 5 years. The firm's cost of capital is 12 percent. Determine the payback period for the project. An inves..
You purchased six put option contracts on Mitsubishi Industries. The strike price was $43.50 and the option premium was $1.50. On the expiration date, the stock was valued at $40.40 a share. What is the payoff on the option contracts?
Bennington Industrial Machines issued 139,000 zero coupon bonds four years ago. The bonds originally had 30 years to maturity with a yield to maturity of 6.9 percent. What is the price of the bonds? What is the market value of the company's debt?
what is your net profit per share from this position?
why someone may not be convinced to make a buy/sell decision based on the dividend discount model
Determine the amount available for distribution to all claimants.
A design-build-operate engineering company in Teaxas that owns a sizable amount of land plans to lease the drilling rights to a mining company.
A company currently pays a dividend of $3.25 per share (D0 = $3.25). It is estimated that the company's dividend will grow at a rate of 16% per year for the next 2 years, then at a constant rate of 7% thereafter. The company's stock has a beta of 1.1..
What other examples of companies with significant dividend distribution policy changes you can think about?
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