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The Jennette Corporation, a firm based in Mt. Pleasant, South Carolina, has an account payable with a British firm coming due in 180 days. The payable requires Jennette to pay £200,000.Winthrop Jennette, the firm's founder and CEO, is an astute manager. He has asked his CFO, Artis Montgomery, to advise him on the various options for dealing with the exchange risk inherent in this payable. He wishes to know the expected dollar cost of (1) A forward hedge. (2) A money market hedge. (3) Remaining unhedged. The following information is available to Artis. The spot rate of the pound today is $1.50. The current 180-day forward rate of the pound is $1.47. Interest rates are as follows:
a. What is the expected dollar cost of the forward hedge?b. What is the expected dollar cost of the money market hedge?c. What is the expected dollar cost of remaining unhedged?d. Which alternative do you recommend? What are the risks associated with thisrecommendation?
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your bank offers to lend you 100000 at an 8.5 annual interest rate to start your new business. the terms require you
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Your firm has debt worth $200,000, with a yield of 9%, and equity worth $300,000. It is growing at a 5% rate, and its tax rate is 40%. A similar firm with no debt has a cost of equity of 12%. What is the value of the firm according to MM with corp..
Compute the effective cost of not taking the cash discount under the following trade credit terms.
1. She recently purchased a cash-value life insurance policy that has the following characteristics: ¦ The frequency and amount of premium payments are flexible.
What is the length of Prestopino's cash conversion cycle and at a steady state in which Prestopino produces 1,500 batteries a day, what amount of working capital must it finance?
Williams & Sons last year reported sales of $10 million and an inventory turnover ratio of 2. The company is now adopting a new inventory system. If the new system is able to reduce the firm's inventory level and increase the firm's inventory turnove..
Ambrin Corp. expects to receive $2,000 per year for 10 years and $3,500 per year for next ten years. What is the present value of this 20 year cash flow. Employ a 11% discount rate.
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