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Your company has ordered some equipment from a European manufacturer for a price of (500,000. The payment terms are that you will pay the amount in Euros on Dec 31. The current (spot) rice of each Euro is $0.80 and the current forward price in a currency forward contract with the underlying asset being Euros is $0.987. In order to hedge the price risk of Euros, what position will you take in the forward contract i.e. will take a short or a long position in the forward contract. If on December 31, the spot price of each Euro turns out to be $0.997, how much will the payment end up costing you in U.S. dollars? Currency forward contracts are settled with physical delivery only of the foreign currency.
Assume the U.S. one-year interest rate is 8%, and the British one-year interest rate is 6%. The one-year forward rate of the pound is $1.97.
The annual risk-free rate is 5%. Find the price of a call option on the stock that has a strike price of $21 and that expires in 1 year. (Hint: Use daily compounding)
Without the new SUV, Ford expects to earn pre-tax income of $80 million from operations next year. Ford pays a 30% tax rate on its pre-tax income. What is the amount Ford owe in taxes next year with the launch of the new SUV?
Explain the following statement: "Preferred stock is a hybrid security."Is the equation used to value preferred stock more like the one used.
Also, let's assume that the firm's expected values for EBIT depend upon which state of the economy occurs this year, with the possible values of EBIT and their associated probabilities as shown below:
(a) Explain how oxidation of a substrate proceeds without oxygen. (b) Describe what is meant by the antiparallel arrangement of DNA.
Calculate the dirty price of this transaction. (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))
A couple of days ago, Alpine paid common stockholders a dividend equal to $3 per share. If investors require a 10 percent rate of return to purchase Alpine's common stock, what is the market value of its common stock?
Let X be a normal variable with parameters (2, 4). Show that E(e^4X)=e^40 and calculate the probability density function of the random variable 2(e^4X) when X is a standard normal variable
What is the present value (at time 0) of the project's cash flows if the opportunity cost of capital is 9%?
Assume Evco, Inc. has a current stock price of $45.02 and will pay a $2.05 dividend in one year; its equity cost of capital is 15%.
How does the airline industry reduce capital costs? (Long term orders, manufacturer contracts, mergers, etc...)
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