Desires to avoid the risk from exchange rate fluctuations

Assignment Help Financial Management

Reference no: EM132057369

1. If a German firm desires to avoid the risk from exchange rate fluctuations, and it will receive $180,000 in 180 days from its business client in the United States, it could:

obtain a 180-day forward sale contract on U.S. dollars(i.e., sell a 180-day forward contract on U.S. dollars).

obtain a 180-day forward buy contract on U.S. dollars(i.e., buy a 180-day forward contract on U.S. dollars).

purchase a 180-day call options on U.S. dollars.

buy U.S. dollars when it’s due at the spot market with the spot rate.

2. Your firm needs a computerized machine tool lathe which costs $50,000, and requires $12,000 in maintenance for each year of its 3 year life. After 3 years, this machine will be replaced. The machine falls into the MACRS 3-year class life category. Assume a tax rate of 35% and a discount rate of 12%.

What is the project’s EAC assuming the machine is worthless at the end of year 3?

a. –$ 6,881

b. –$12,049

c. –$14,771

d. –$22,715

e. –$23,099

Reference no: EM132057369

Questions Cloud

What is the aftertax cost of debt-pretax cost of debt : Drogo, Inc., is trying to determine its cost of debt. What is the company’s pretax cost of debt? what is the aftertax cost of debt?

Multinational corporation degree of translation exposure : Which of the following is not the factor that affects a multinational corporation’s degree of translation exposure?

The total market value of the common stock : The total market value of the common stock of the OKF Real Estate Company is $6 million, Estimate the required return on OKF's new venture.

False about hedge funds : Which of the following is false about hedge funds?

Desires to avoid the risk from exchange rate fluctuations : If a German firm desires to avoid the risk from exchange rate fluctuations, and it will receive $180,000 in 180 days from its business client in United States,

Calculate and interpret the revenue variance : Calculate and interpret the profit variance. Calculate and interpret the revenue variance. Calculate and interpret the cost variance.

Investment should firms really put into reducing emissions : Is climate change really a problem? How much investment should firms really put into reducing emissions.

Market dip and it returning back to the before dip value : What's the longest time between a market dip (Dow or S&P 500) and it returning back to the before dip value.

Represents inflow in bond refunding decision : Which of the following represents an inflow in a bond refunding decision?

User Account

All Pages