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Hedging Motives
Imagine two companies, Oil Inc. and Gold Inc., which invest in exploration activities. The probability of ?nding one unit of oil and gold, respectively, is the same, but per-unit extraction costs are $50 for Oil and $5 for Gold. The market prices of a unit of oil and a unit of gold are both $100. Thus, the marginal pro?t to Oil from discovering one more unit of oil is 100 - 50 = $50, while the profit to Gold from discovering one more unit of gold is 100 - 5 = $95. Which ?rm, Oil or Gold, should hedge less? Why?
The fixed cost would only be $2100 a year and the tax rate is 34 percent. what is the annual operating cash flow if the annual depreciation expense is $900?
ABC is currently financed entirely with common stock with 1,000 shares outstanding.
Discuss the circumstances under which Satyam's fraud was exposed? What do you think were the reasons for the fraud? Could this fraud have been prevented?
You are considering starting a walk-in clinic. Your financial projections for the first year of operations are as follows:
What are the three major sources of DI liquidity? What are the two major uses?
You are a counselor in a rural area. Your supervisor asks you to visit the home of a child who has become violent. The mother states that the father is a strict
Calculate NPV of this project. Based on these elements, would you launch the project? With a 12% capital requirement, is your decision changed?
At what forward rate is this arbitrage eliminated? (Do not round intermediate calculations. Round your answer to 5 decimal places. (e.g., 32.16161))
What is your effective annual interest rate (an opportunity cost) on the revolving credit arrangement if your firm does not use it during the year?
Suppose a bank has found bank qualified municipal bonds which have a nominal grossrate of return of 8 percent and that it can borrow funds needed for this purchase at a rate of 6.25percent. This bond is in the 35 percent tax bracket. What is the n..
Life Insurance is a very popular insurance type in Bangladesh. Explicate the reasons behind the popularity of this financial product.
1) Explain THREE (3) roles by government to avoid fluctuating of Ringgit Malaysia in economic perspectives.
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