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Suppose the exchange rate on the 180-day forward contract on the Swiss franc is $0.80 per Swiss franc. Current spot exchange rate is $0.70. You live in the U.S. but are considering the purchase of a shipment of Swiss watches costing 10 million Swiss francs. The merchant in Zurich has promised you that the cost of the shipment will not change over the next 180 days. But you worry that the dollar will weaken further against the Swiss franc, making the dollar-cost of the shipment more expensive than at present. To hedge this foreign exchange risk, you buy the 180-day forward contract on Swiss francs at the quoted rate.
1. Without a forward contract, what is the dollar-cost of the shipment if the spot exchange rate at the time of purchase is $0.75?
2. With a forward contract, calculate the total cost in USD.
B&O Railroad's convertible debentures were issued at the $1000 par value in 2002. At any time prior to their maturity on Feb. 1, 2022, a debenture holder can exchange a bond for 25 shares of common stock. What is the conversion price. Must show wo..
If the company plans to replace the machine when it wears out on a perpetual basis, which machine should you choose?
Devon Automotive estimates that it takes the company about 62 days to collect cash from customers on finished goods from the day it receives raw materials, and it takes about 67 days to pay its suppliers. What is the company's cash conversion cycl..
You estimate that a passive portfolio invested to mimic the S&P 500 stock index yields an expected rate of return of 13% with a standard deviation of 25%.
If randomly selected stocks are added to the portfolio until the portfolio has no asset- specific risk remaining, which of the following is the best estimate the portfolios standard deviation of returns?
The only capital investment required for a small project is investment in inventory. Profits this year were $11,800, and inventory increased from $4,900 to $6,800. What was the cash flow from the project?
Calculate the annual depreciation over the useful life of the machine using the straight line depreciation method. Set up a depreciation schedule.
Construct a pro forma income statement for the first year and second year for the following assumptions.
Are bank mergers and acquisitions good for the economy? How about the shareholder? What impact will it have on the customer? Do customers gain value, perhaps through economies of scale? Is bigger necessarily better?
They expect their investment account to earn 9%. How large must the annual payments at t=5,6 and 7 be to cover Jessica's anticipated college costs?
Comfort Shoe Corporation of England has decided to spin off its Tango Dance Shoe Division as a separate corporation in the US. The assets of the Tango Dance Shoe Division have the same operating risk characteristics as those of Comfort.
How many shares of JKL stock must you sell to unlever your position if you can loan out funds at 8 percent interest? Ignore taxes.
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