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Suppose that you (i.e., company XYZ) are a US-based importer of goods from Canada. You expect the value of the Canada to increase against the US dollar over the next 6 months. You will be making payment on a shipment of imported goods (CAD100,000) in 6 months and want to hedge your currency exposure. The US risk-free rate is 5% and the Canada risk-free rate is 4% per year. The current spot rate is $1.25/CAD, and the 6-month forward rate is $1.3/CAD. You can also buy a 6-month option on Canadian dollars at the strike price of $1.4 /CAD for a premium of $0.10/CAD.
If XYZ wants to hedge the transaction exposure using forward, XYZ should enter a ________ position in a forward contract of CAD 100,000 due in six months.
Which of the following assumptions would you need for stock price maximization to be the right objective?
The difference between bank cash and book cash is called: A. float. B. disbursement float. C. net float. D. collection float. E. None of these.
Compute the expected net present value of this project.- How does the change in the estimated sales volume influence the net present value of the project?
The Elkmont Corporation needs to raise $52.4 million to finance its expansion into new markets. The company will sell new shares of equity via a general cash offering to raise the needed funds. How many shares need to be sold?
what is firms overall cost of capital, WACC? what is the cost of equity?
Bond X is a premium bond making annual payments. The bond has a coupon rate of 9 percent, a YTM of 7 percent, and has 13 years to maturity. Bond Y is a discount bond making annual payments. This bond has a coupon rate of 7 percent, a YTM of 9 percent..
What was the net additional cost of the stock? What was the effective cost of the stock purchase (stock and futures contracts combined)?
Calculate the sensitivity of your base-case NPV to changes in fixed costs. What is the accounting break-even level of output for this project?
Calculate the differences between the two payment streams; then find its IRR.
What is the range of values for income paid to foreigners, so that each of the given would be true?- The country has a current account surplus.
You purchased 250 shares of General Motors stock at a price of $80.06 two years ago. What is your annualized holding period return (annual percentage rate)?
A firm’s target capital structure is 10% preferred, 45% debt, and 45% common equity.
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