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Quantum Inc., a U.S.-based corporation, borrows SF 2,000,000 from the Swiss bank, UBS. The entire principal is to be repaid at the end of the year, and the interest rate is 4% per annum to be paid at the end of the year in Swiss francs. The current spot rate is SF 0.97/$.
a) Suppose that by year-end, the Swiss franc were to appreciate against the dollar by 10%. Compute the effective cost of the loan (i.e., the effective interest rate in USD).
b) Consider an alternative scenario. Suppose that by the end of the year, the franc were to depreciate against the dollar by 10%. Compute the effective cost of the loan (i.e., the effective interest rate in USD).
A firm is considering leasing a computer system that costs $1,000,000 new. The lease requires annual payments of $135,000 in arrears for 10 years. Calculate the net advantage to leasing assuming zero residual value. Should the firm lease the comput..
Your company manufactures sports equipment. You are considering replacing a brand of golf clubs with a new line of golf clubs. which of the following is not considered to be an incremental cash flow in your capitol budgeting analysis?
Lannister Manufacturing has a target debt−equity ratio of .55. Its cost of equity is 15 percent, and its cost of debt is 7 percent. If the tax rate is 35 percent, what is the company’s WACC?
Julie Horton, CEO of Horton Mfg., wants the company to reduce the percent of generators that customers return. In June, the company shipped 9,000 generators, and 2,610 were eventually returned. What percent of the June shipment was eventually returne..
A. Suppose that a U.S. Treasury note maturing June 15, 1995 is purchased with a settlement date of February 17, 1994. The coupon rate is 4.125% and the par value is $100,000. The next coupon date is June 15, 1994. What is the full (dirty) price of th..
ABC Company is currently financed by $1,500,000 in equity. There is an after tax return of $325,000. Due to customer demand for the company's product, it wants to expand operations by investing another $1,500,00. Calculate the return to shareholders ..
Larkin could wait until the sales proceeds were received in August and November, hope the recent strengthening of the euro would continue, and sell the euros received for dollars in the spot market. Larkin estimates the cost of equity capital to be 1..
Please discuss Revel casino that was built in Atlantic City, New Jersey and then shortly thereafter became bankrupt. A Toronto based company purchased Revel for five cents on the dollar. The class discussion is centering on what exactly went wrong fo..
Which one of the following is defined as the average compounded return earned per year over a multiyear period?
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.88 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life. If the tax rate is 35 percent..
Working capital: Winston Electronics reported the following information at its annual meetings. What is the company’s net working capital?
The U. S. Border Patrol has been accused of racial profiling in its decisions about whom to select for questioning in the border regions. People who "look Mexican" have been stopped and question under suspicion of being illegal immigrants.
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