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Due to globalization, companies may have exposure to foreign exchange risk, as unexpected change of exchange rate may affect the settlement of contracts and firm value. Answer the following questions related to foreign currency exposure.
Questions:
(1) List two major differences between transaction exposure and economic exposure.
(2) List two reasons why operational hedging is better than financial hedging in the management of economic exposure.
(3) True or false? “If a company’s revenue and costs/ expenses are in home currency, it does not have any transaction exposure or economic exposure.” Explain.
Participate in a discussion with your classmates regarding how monetary policies affect our lives. Utilizing the knowledge that you have accumulated during our course, and by reading or watching the current news, determine the monetary policy issues ..
Duval Inc. uses only equity capital, and it has two equally-sized divisions. Division A's cost of capital is 10.0%, Division B's cost is 14.0%, and the corporate (composite) WACC is 12.0%. All of Division A's projects are equally risky, as are all of..
You’ve just joined the investment banking firm of Dewey, Cheatum, and Howe. They’ve offered you two different salary arrangements. You can have $8,300 per month for the next three years, or you can have $7,000 per month for the next three years, alon..
A project has an initial cost of $140,000 and an estimated salvage value after 16years of$80000. Estimated average annual recipts are $26,000. Estimated average annual disbursement are $16,000. Assuming that annual receipts and disbursement will be u..
Discuss why firms are attracted to foreign markets, for example, to increase profits and revenues and to gain access to cheaper manufacturing. How may this affect the domestic country of the firm?
Suppose you have a firm that faces a %50 tax rate. Suppose you have an increase in operating revenue of $25000 and an increase in operating expense of $30000, what is your change in net cash flow?
Calculate the expected return of portfolio A with a beta of 1.5. What is the alpha of portfolio A. (Negative value should be indicated by a minus sign.)
How you estimated the percentage of capital that comes from debt, and common equity - find cost of debt
The sales for October, November and December are $20,000, $24,000 and $36,000, respectively. For any particular month of sales, the following percentages are received over time in cash: 10% in cash from that same month of sales; 60% in cash from the ..
Which of the following could be expected to result in a stock market price change?
An interest rate is 13.34% per annum expressed with continuous compounding. What is the equivalent rate with semi annual compounding? (Margin of error: +/- 0.01%)
The Diversified Growth Co. has three different divisions. Its low-risk division accounts for $5 million of its assets and has a beta of 0.8. Its middle-risk division accounts for $10 million of its assets and has a beta of 1.1, while its high-risk di..
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