What is the foreign exchange transaction cost for the firm

Assignment Help Financial Management

Reference no: EM132029417

Calculate the following: Show all work

1) Portland Forest Products Inc. has a cost of debt of 8%, the risk-free interest rate is 3.5% and the expected return on the market portfolio is 8.5%. Portland’s tax rate is 30% and its optimal capital structure is 40% debt and 60% equity. If Portland has a beta of 1.2, what is the firm’s weighted average cost of capital? a. 7.34% b. 10.46% c. 7.94% d. 8.90%

2) If a U.S.-based firm borrows €1,500,000 for one year at 5.00% and during the year the euro depreciates from an initial rate of $1.30/€ to $1.10/€, what is the dollar cost of this debt? Your answer: ________________% (Keep two decimals; Do include the minus sign “-” if your answer is a negative number.)

3) If a U.S.-based firm borrows €1,500,000 for one year at 5.00% and during the year the euro depreciates from an initial rate of $1.30/€ to $1.10/€, what is the foreign exchange transaction cost for the firm? Your answer: ________________% (Keep two decimals; Do include the minus sign “-” if your answer is a negative number.)

4) If a Brazil-based firm borrows $2 million for two years at 5.00% and during the period the dollar appreciates from R$2.00/$ to R$2.80/$, what is the annualized R$ cost of this debt? Your answer: ________________% (Keep two decimals; Do include the minus sign “-” if your answer is a negative number.)

Reference no: EM132029417

Questions Cloud

Identify and evaluate the government policy : Discuss the implications of the findings for the business or industry for which you currently work - Identify and evaluate the government policy

Increases be related to employee performance management : Should employee salary increases be related to employee performance Management? Why, or why not? If yes, how should they be linked.

What are some reasons a company like ford : What are some reasons a company like Ford could never leverage its size to become the only car producer in the market?

How much can the developer pay for the tract of land : A developer wants to acquire a 20-acre tract of land to develop. How much can the developer pay for the tract of land?

What is the foreign exchange transaction cost for the firm : what is the firm’s weighted average cost of capital? what is the foreign exchange transaction cost for the firm?

How strategic management has successfully impacted : Write a 2 page that explains how strategic management has successfully impacted other organizations.

Would we consider them to be staff : Can you help me define what stakeholders are in a corporation? Would we consider them to be staff? Board of directors?

What trends in real gdp have occurred in the time period : What trends in real GDP have occurred in the time period shown in the BEA release highlights document?

Is irr an acceptable method to compare two mutually : Later, he visits one of his colleagues and talks about his findings. His colleague recommends him to check the NPVs also. He says "O.K. Why not?

User Account

All Pages