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You are the vice president of finance for Exploratory Resources, headquartered in Huston, Texas. In January 2010, your firm's Canadian subsidiary obtained a six-month loan of 150,000 Canadian dollars from a bank in Houston to finance the acquisition of a titanium mine in Quebec province. The loan will also be repaid in Canadian dollars. At the time of the loan, the spot exchange rate was U.S. $0.8995/Canadian dollar and the Canadian currency was selling at a discount in the forward market. The June 2010 contract (face value = C$150,000 per contract) was quoted at U.S. $0.8930/Canadian dollar.
a. Explain how the Houston bank could lose on this transaction assuming no hedging.
b. If the bank does hedge with the forward contract, what is the maximum amount it can loose?
Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $1.25 coming 3 years from today.
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The calculation of incremental free cash flows over a project's life should include
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antitrust laws were essentially created to stop businesses that got too large from blocking competition and abusing
Consider an asset that costs $635,000 and is depreciated straight-line to zero over its eight-year tax life. The asset is to be used in a five-year project; at the end of the project, the asset can be sold for $125,000. If the relevant tax rate is 35..
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