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a. A US corporation has an account payable to an unrelated Irish company in 90 days. The amount of the payable is €500,000. The spot exchange rate for the euro is EUR/USD 1.2131. The company’s combined federal and state income tax rate is 27.3%; the Irish corporate income tax rate is 12.5%. The company expects the exchange rate for the euro to decline to 1.2030 prior to the account’s due date. When should the company make the payment? Explain.
b. If the payee on the account is an affiliated corporation, when should the company make the payment? Explain.
c. What is the payment described in part b called? How can the company justify the amount of the payment if it is challenged by the US Internal Revenue Service or Ireland’s Revenue authority?
Explain the influence of exchange rate. Deluxe Corporation is a large chain of retail stores operating in the USA.
you decide to get a better understanding of the cash flows and other financial basics about the business.
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You are graduating from college at the end of this semester and after reading the. How much will you have when you retire in 45 years?
Newman manufacturing is considering a cash purchase of the stock of Grips Tool.
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You are the manager of the XYZ mutual fund. The following table reflects the activity of the fund during the last quarter. The fund started the quarter on January 1 with a balance of $100 million. January HPR= -1.3% February HPR= 6.2% March HPR = 2.2..
Firm pays first dividend ever in year 5 of $2.00. The firm expects growth rate in year 6 to be .20, G7 = .15, G8 = .10 and G9 = .05 which will continue into perpetuity. a) What would you pay for the stock in year 2? b) What is the dividend yield, cur..
Suppose that a bank has $5 billion of one-year loans and $35 billion of five-year loans. These are financed by $35 billion of one-year deposits and $5 billion of five-year deposits. The bank has equity totaling $2 billion and its return on equity is ..
Stocks K and M have the following probability distributions of expected future returns:
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