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Ebay is considering whether to establish a sale distribution center in China. Given the large Chinese consumer market, Eaby estimates that its net sales revenues will be 15 million yuans in the first year, 20 million yuans in the second year, and 35 million yuans in the third year. The current spot rate is 6 yuans per US dollar.
The project is assumed to have a beta of 1. The Chinese market risk premium is 10%, and U.S. market risk premium is 6%. The risk free rate is assumed to be 6%. Ebay’s initial investment outlay, consisting of plant and equipment, is estimated at 12 million yuans, and the plant and equipment will be depreciated on a straight-line basis over a three-year period, with salvage value of 2 million yuans. The corporation tax rate is 25% in China and 35% in the US.
Should Ebay establish the distribution center? Why?
If Milton stretches its accounts payable an extra 10 days beyond the due date next year, how much additional short-term funds (that is, trade credit) will be generated?
ratio analysiscalculate the current ratio quick ratio cash to current liabilities ratio over a two-year period.
KLM Corp. common stock is currently selling for $8 a share. Due to NYSE listing requirements, KLM decided to declare a non-discretionary 2-for-5 reverse stock split. As a result of the split, KLM common stock market price per share will be _____, all..
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Johnson Products earned $5.20 per share last year and paid a $2.15 per share dividend. If ROE was 16 percent, what is the sustainable growth rate?
Consider 3 Treasury bonds which pay semi-annual coupons. Bond A has 5 years remaining to maturity and a coupon rate of 10%. Bond B has 20 years remaining to maturity and a coupon rate of 10%, and Bond C has 20 years remaining to maturity and a coupon..
Construct an interest rate tree according to the method presented in class with step size h = 0.5, volatility ? = 0.2, drift m = 0.1, and initial 0.5-year rate r = 8%. The tree should give short rates out to time 0.5. What is the time 0 price of $1 p..
Spot and forward rates. Suppose the exchange rate for the Swiss franc is quoted as SF 1.50 in the spot market and SF in the 90-day forward market. Is the dollar selling at a premium or discount relative to the franc? Does the financial market expect ..
Your portfolio is 100 shares of Sunny Morning, Inc. The stock currently sells for $85.93 per share. The company has announced a dividend of $3.65 per share with an ex-dividend date of April 19. Assuming no taxes and no news or other surprises, how mu..
The Mitchell Company needs to raise $50 million of new equity capital. Its common stock is currently selling for $50 per share. The investment bankers require an underwriting spread of 3% of the offering price, and the company's legal, accounting, an..
Provide an estimate of the value of the company, indicating the proportion of the value accounted for by the company's growth prospects and determine the prospective price-earnings ratio of the company and comment on its anticipated change in value..
A company is considering a 5-year project that opens a new product line and requires an initial outlay of $78,000. The assumed selling price is $91 per unit, and the variable cost is $58 per unit. Fixed costs not including depreciation are $17,000 pe..
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