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Using Spot and Forward Exchange Rates [LO1] Suppose the spot exchange rate for the Canadian dollar is Can$1.09 and the six-month forward rate is Can$1.11. a. Which is worth more, a U.S. dollar or a Canadian dollar? b. Assuming absolute PPP holds, what is the cost in the United States of an Elkhead beer if the price in Canada is Can$2.50? Why might the beer actually sell at a different price in the United States? c. Is the U.S. dollar selling at a premium or a discount relative to the Canadian dollar? d. Which currency is expected to appreciate in value? e. Which country do you think has higher interest rates—the United States or Canada? Explain.
Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,250,000. The fixed asset falls into the three-year MACRS class (MACRS Table). What is the net cash flow of the project for the fol..
Bond valuation Callaghan Motors' bonds have 5 years remaining to maturity. Interest is paid annually, they have a $1,000 par value, the coupon interest rate is 10.5%, and the yield to maturity is 6%. What is the bond's current market price?
The cost of machinery for a project is $400,000. Expected life of the equipment is 4 years with a 10% salvage. direct labor is $30 per hour. The production rate is 15 parts per hour. Direct material is $12.37 per unit. how many parts need to be made ..
What's the future value of a 5%, 5-year ordinary annuity that pays $600 each year? An investment will pay $100 at the end of each of the next 3 years, $250 at the end of Year 4, $400 at the end of Year 5, and $500 at the end of Year 6. Find the inter..
Create a list of 5 ideas for a new venture; include a brief description of each. Then select your top two ideas and write a brief paragraph about the potential of each, explaining why you think it’s a good idea. Research a franchise you might like to..
Prada has ten million shares outstanding, generates free cash flows of $ 60 million each year and has a cost of capital of 10%. It also has $40 million of cash on hand. Prada wants to decide whether to repurchase stock or invest the cash in a project..
Stock in Daenerys Industries has a beta of 1.3. The market risk premium is 7 percent, and T-bills are currently yielding 4.5 percent. The company’s most recent dividend was $1.50 per share, and dividends are expected to grow at an annual rate of 8 pe..
What does the ethical principle of “sharing benefits” mean? all participants in the same study should receive an equal share of the benefits or subject payments. all those who belong to the population being studied will share equally from the benefit..
The Pre-Tech Company is currently considering the purchase of some new machinery. The machinery will have a useful life-time of 9 years and will cost $ 600,000 to be paid in the current period. The appropriate discount rate for this project is 16%. I..
Assume no depreciation is allowed for tax purposes, and you have to pay 30% tax on your net rental income.
Consider three bonds with 6.8% coupon rates, all making annual coupon payments and all selling at a face value of $1,000. The short-term bond has a maturity of 4 years, the intermediate-term bond has maturity 8 years, and the long-term bond has matur..
The Company expects a constant growth in earnings and dividends of 4% into the foreseeable future. It is expected that the next dividend paid to stockholders will be $1.50/share. Currently the market of investor is demanding or requiring 12% on this ..
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