Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
XYZ Company from Australia is evaluating a proposal from its British subsidiary ABC to build a new plant in the United Kingdom. The expected after-tax nominal cash flows in (thousands of) pounds are as follows:
Year
0
1
2
3
Cash Flow
-740
200
300
350
The current spot rate is 1.80A$/£. The firm's tax rate is 30%. The firm's pre-tax cost of debt in Australia is 8%; the firm's debt-to-equity ratio is 2; the beta of the firm's common stock is 1.25; the market risk premium is 8%, the yield of the long term Australian Treasury bond is 6%. Assume the term structure is flat.
a. ABC forecasts that over the next three years, the expected inflation for UK and Australia are 2% p.a. and 5% p.a. respectively and it believes PPP holds. Would ABC recommend going ahead with the project or not based on this information? Show the detailed calculation to justify the recommendation.
b. Separately, the board of XYZ, is worried about the consequences of uncertainty associated with the Brexit. It seeks the consultation of Professor Markt. Prof. Markt points out that over the next three years, the interest rates for UK and Australia are 3% p.a. and 4% p.a. respectively and he believes that uncovered interest rate parity relationship holds. Would the board recommend taking on the project or not based on this information? Show the detailed calculation to back up the recommendation.
c. The board looks at the two recommendations and wants to make sense of two results. Discuss the reasons why they are the same or different.
The machine salvage value of P2,500 at the end of its 5-year useful life. Determine if it is worthwhile to invest in the fryer at a minimum interest rate of 5%.
The initial investment will require $237,000 in fixed assets that will be depreciated using the straight-line method to a zero book value over the five-year life of the project. The company has a marginal tax rate of 34 percent. What is the annual..
Loren Seguara and Dale Johnson both work for Sports Products, Corporation, a major producer of boating machine and accessories. Loren works as a clerical assistant in the Accounting Department, and Dale works as a packager in the Shipping section.
What's the difference between the arithmetic and geometric average return (conceptually, not mathematically), and when is it best to use each?
a borrower is repaying a loan with 10 annual installments of 2000. half of the loan is repaid by the amortization
fed ex common stock currently trades at 51.00 and its most recent annual dividend was 1.40. sunday night fedex issued a
Charlene just bought her dream car, a 2011 Porsche Carrera GTS Cabriolet that cost $125,000. She paid $20,000 down and financed the balance over 72 months at 6.5% p.a. (Assume that Charlene makes all required payments are made on time).
Mr. Arthur recently bought a block of 100 shares of Bingham Company common stock for $6,000. The stock is expected to provide an annual cash flow of dividends of $400 indefinitely.
Further discuss the ability of central banks to manage domestic economic problems while maintaining a pegged exchange rate?
What is BFC's return on equity and the estimated sustainable growth rate?
Cost of common stock equity-CAPM J&M Corporation common stock has a beta b, of 1.7. The risk-free rate is 7%, and the market return is 14%
Calculate how much debt Grainwaves will need to issue to maintain their target capital structure. What will be the appropriate cost of debt for Grainwaves.
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd