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Orlando Co. has its U.S. business funded with dollars with a capital structure of 60 percent debt and 40 percent equity. It has its Thailand business funded with Thai baht with a capital structure of 50 percent debt and 50 percent equity. The corporate tax rate on U.S. earnings and on Thailand earnings is 30 percent. The annualized 10-year risk-free interest rate is 6 percent in the United States and 21 percent in Thailand. The annual real rate of interest is about 2 percent in the United States and 2 percent in Thailand. Interest rate parity exists. Orlando pays 3 percentage points above the risk-free rates when it borrows, so its before-tax cost of debt is 9 percent in the United States and 24 percent in Thailand. Orlando expects that the U.S. stock market return will be 10 percent per year, and the Thailand stock market return will be 28 percent per year. Its business in the United States has a beta of .8 relative to the U.S. market, while its business in Thailand has a beta of 1.1 relative to the Thai market. The equity used to support Orlando's Thai business was created from retained earnings by the Thailand subsidiary in previous years. However, Orlando Co. is considering a stock offering in Thailand that is denominated in Thai baht and targeted at Thai investors. Estimate Orlando's cost of equity in Thailand that would result from issuing stock in Thailand.
Mention the factors which affect currency call option premiums and briefly describe the relationship that exists for each. Do you think an at-the-money call option in euros has a higher or lower premium than an at-the-money call option in British ..
Computation of Degree of operating leverage and financial leverage & combined leverage and EPS if sales level declined.
since falling real estate prices and a tough job market made it difficult for citizens to move. Examine this sitiuation through the lens of optimal tax theory. Is the increase in the sales tax efficient? is it fair?
What overhead rate will the company achieve on the basis of this information? Use direct labor dollars as a base. Can anyone help me with this problem ? Thank you in advanced.
Gordon Company issued $1,000,000, ten year bonds and agreed to make annual sinking fund deposits of $80,000. The deposits are made at the end of each year into an account paying 5 percent yearly interest.
The robinson company had a cost of goods sold of 1,000,000 in 2011 and 1,200,000 in 2012. b. what would have been the inventories in 2012 if the 2011 turnover ratio had been maintained?
For discussion purposes counter statement that it is worse for auditors to incorrectly predict bankruptcy than when auditors fail to predict bankruptcy.
You are planning to purchase a house in five years and intend to save a fixed amount of money each month for a down payment. How will you invest your savings and what are important considerations in selecting an investment vehicle?
What is the amount the firm should use as the initial cash flow attributable to net working capital when it analyzes this project?
Data for use in the forecast are shown below. However, the CEO is concerned about the impact of a change in the payout ratio from the 10% that was used in the past to 50%, which the firm's investment bankers have recommended.
What is the maximum initial cost the company would be willing to pay for the project?
The company has an EOQ of 500 suits and a safety stock of 100 suits. Once an order is placed, it takes three days for Saché to get the suits in.
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