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Assume that you can borrow as much as $1,000,000 or €800,000. Currently, the spot exchange rate is €0.8/$ and the three-month forward exchange rate is €0.7813/$. The interest rate is 5.6% per annum in the United States and 5.4% per annum in France. If the IRP does not hold, how would you carry out covered interest arbitrage? Show all the steps and determine the arbitrage profit.
Assume that Congress amended the tax law to limit the itemized deduction for charitable contributions to 5 percent (rather than 50 percent) of AGI. Discuss the incidence of the tax increase represented by this expansion of the tax base.
What is the project’s payback? What is the project’s NPV? Its IRR? Its MIRR?
During the same year, the U.S. dollar appreciated by 25% against the peso (i.e., pesos per dollar increased by 25%).
Fama’s Llamas has a weighted average cost of capital of 10.8 percent. The company’s cost of equity is 13 percent, and its pretax cost of debt is 8.8 percent. The tax rate is 38 percent. What is the company’s target debt−equity ratio?
assuming interest rates are 5 for aaa rated corporate bonds calculate the value of your bond relative to this interest
?Domenghini Inc. is considering a proposal to enter a new line of business. What is the project’s net present value (NPV)?
On November 26, 2015, the company recorded the following correct journal entry to record the sale of the equity securities:
Market participants who use foreign exchange derivatives tend to take positions based on their expectations of future exchange rates. Portfolio managers of financial institutions may take positions in foreign exchange derivatives to hedge their expos..
For a policy that pays only 75% of the home value, what are your expected costs with and without the seawall?
Because the cost of debt is always more than the cost of equity, most companies try to apply financial leverage as much as possible.
Case Study - Analysis of Financial Statements - Why are ratios useful? What three groups use ratio analysis and for what reasons
Given the following information for Dunhill Power Co. find the WACC. Assume the company’s tax rate is 35 percent. Debt: 3,000 8 percent coupon bonds outstanding, $1,000 par value, 20 years to maturity, selling for 103 percent of par; the bonds make s..
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