User Account

All Pages

Trade its shares on the new york stock exchange

Assignment Help Financial Management
Reference no: EM13972447

Assume that the Rome Electricity Company (REC) wishes to create a sponsored ADR program worth $300 million to trade its shares on the New York Stock Exchange. Also assume that REC is currently selling on the Borsa Italiana (the Italian Stock Exchange, in Milan) for €29 per share and that the current dollar/euro exchange rate is $1.23/€. American Bank and Trust (ABT) is handling the ADR issue for REC and has advised REC that the ideal trading price for utility company shares on the NYSE is about $71.34 per share (or per ADR).

a) Assume that REC's stock price rises from €29 to €35 per share. If the exchange rate does not also change, what will happen to REC's ADR price?

= $________ /ADR

b) If the euro appreciates from $1.23/€ to $1.31/€ but the price of REC's shares remains unchanged in euros, what will happen to REC's ADR price?

= $_________/ ADR

Reference no: EM13972447

Questions Cloud

Optimal capital structure-cost of common equity : F. Pierce Products Inc. is considering changing its capital structure. F. Pierce currently has no debt and no preferred stock, but would like to add some debt to take advantage of low interest rates and the tax shield. what is the firm's optimal capi..
Any tax loss carry back or carry forward provisions : During 2014, Eagle Beach Company EBC) had sales of $1,000,000, cost of goods sold of $425,000, administrative and selling expenses of $95,000, depreciation expense of $140,000 and interest expense of $70,000. The tax rate is 35 percent. Ignore any ta..
What is a discount bond : A Bond is currently selling for $1040 and has a coupon rate of 8%. Should the YTM be higher or lower than 8%? What is a discount bond? a premium bond?
How many shares does it have after the recap : Dye Trucking raised $110 million in new debt and used this to buy back stock. After the recap, Dye's stock price is $6.5. If Dye had 75 million shares of stock before the recap, how many shares does it have after the recap? Enter your answer in milli..
Trade its shares on the new york stock exchange : Assume that the Rome Electricity Company (REC) wishes to create a sponsored ADR program worth $300 million to trade its shares on the New York Stock Exchange. Also assume that REC is currently selling on the Borsa Italiana (the Italian Stock Exchange..
Calculate the after-tax cost of the call premium : Schooner Company is contemplating offering a new $50 million bond issue to replace an outstanding $50 million bond issue. The firm wishes to take advantage of the decline in interest rates that has occurred since the initial bond issuance. Calculate ..
Why is there a difference in the yields : Suppose taxable bonds are currently yielding 8%, while at the same time, the munis of comparable risk and maturity are yielding 6%. Which is more attractive to an investor in the 40% tax bracket?
After taking a sample and computing : After taking a sample and computing, a statistician says,
Residual distribution policy : Harris Company must set its investment and dividend policies for the coming year. It has three independent projects from which to choose, each of which requires a $3 million investment. These projects have different levels of risk, and therefore diff..

Reviews

Write a Review

Financial Management Questions & Answers

  Rust bucket motor credit corporation

Rust Bucket Motor Credit Corporation (RBMCC), a subsidiary of Rust Bucket Motor, offered some securities for sale to the public on March 28, 2008. Under the terms of the deal, RBMCC promised to repay the owner of one of these securities $100,000 on M..

  Find the present value of such stream of cash payments

A U.S. treasury bond (selling at a par value of $1,000) that matures at the end of 5 years is said to have a coupon rate of 6% if, after paying $1,000, the purchaser receives $30 at the end of each of the following 9 6-month periods and then receives..

  Interest rate risk

Both Bond Bill and Bond Ted have 7 percent coupons, make semi-annual payments, and are priced at par value. Bond Bill has 3 years to maturity, whereas Bond Ted has 20 years to maturity. If interest rates suddenly rise by 2 percent, what is the percen..

  What is the intrinsic value of the stock

Miltmar Corporation will pay a year-end dividend of $3, and dividends thereafter are expected to grow at the constant rate of 4% per year. The risk-free rate is 4%, and the expected return on the market portfolio is 14%. The stock has a beta of 0.90...

  Single parent and motivational training consultant

Michael Margolis is a single parent and motivational training consultant from Reno, Arizona. He is wondering about potential returns on investments given certain amounts of risk. Michael invested a total of $6000 in three stocks ($2000 in each) with ..

  What is the annual interest rate you are paying

You have just borrowed $20,000 to buy a new car. The loan agreement calls for 60 monthly payments of $444.89 each to begin one month from today. What is the annual interest rate you are paying?

  Current market price of stock reflects its intrinsic value

The stock of Nogro Corporation is currently selling for $24 per share. Earnings per share in the coming year are expected to be $6. The company has a policy of paying out a fraction of 0.6 of its earnings each year in dividends. Assuming the current ..

  Calculate the net present value and profitability index

Fijisawa, Inc. is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. Calculate the net present value. Calculate the profitability index. Calculate the internal rate of retur..

  Impressive growth in sales over the past several years

The growing Internet retailer "Nile" corporation has shown impressive growth in sales over the past several years, with sales this past year at $220 million. If the company has a net profit margin of 1.5%, what would its net profit be? $____ million.

  How many francs would a dollar buy tomorrow

Suppose that the exchange rate is 0.85 dollars per Swiss franc. If the franc appreciated 12% against the dollar, how many francs would a dollar buy tomorrow?

  What is the rate of return on this security

The preferred stock of Er Railroad Ties pays an annual dividend of $8.20 and sells for $51.70 a share. What is the rate of return on this security?

  Reduce its economic exposure to exchange rate risk

Kerr, Inc., a major U.S. exporter of products to Japan denominates its exports in dollars and has no other international business. It can borrow dollars at 9 percent to finance its operations or borrow yen at 3 percent. If it borrows yen, it will be ..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd