What is the present value in dollars of its equity

Assignment Help Finance Basics
Reference no: EM131106751

After all foreign and U.S. taxes, a U.S. corporation expects to receive 3 pounds of dividends per share from a British subsidiary this year. The exchange rate at the end of the year is expected to be $2 per pound, and the pound is expected to depreciate 5% against the dollar each year for an indefinite period. The dividend (in pounds) is expected to grow at 10% a year indefinitely. The parent U.S. corporation owns 10 million shares of the subsidiary. What is the present value in dollars of its equity ownership of the subsidiary? Assume a cost of equity capital of 15% for the subsidiary.

Reference no: EM131106751

Questions Cloud

Compute the pro-forma income statement and balance sheet : A company published the following information in its financial statements for its 2015 annual report: Prepare the pro-forma 2016 income statement, balance sheet, and statement of cash flows.
What is the expected forward exchange rate : If this project was instead undertaken by a similar U.S.-based company with the same risk-adjusted cost of capital, what would be the net present value and rate of return generated by this project? What is the expected forward exchange rate 1 year fr..
Design Combinational /sequential electronic logic diagram : Digital Electronics Assignment Combinational/Sequential Logic design with Integrated Circuits (Dual in line package) Car wash concept with the following steps in a Combinational Logic Diagram
Analyze the impact of gender and culture on communications : Describe strategies for using communication techniques to resolve interpersonal conflicts. Analyze the impact of gender and culture on interpersonal communications
What is the present value in dollars of its equity : The parent U.S. corporation owns 10 million shares of the subsidiary. What is the present value in dollars of its equity ownership of the subsidiary? Assume a cost of equity capital of 15% for the subsidiary.
Calculate portfolio new beta : The portfolio's beta is 1.20. Suppose you sell one of the stocks with a beta of .8 for $5,000 and use the proceeds to buy another stock whose beta is 1.6. Calculate your portfolio's new beta.
Rederive this algorithm for a discounted problem : In Section 12.3, we derived the dynamic-programming algorithm for a finite-horizon problem. In this problem, we rederive this algorithm for a discounted problem for which the cost-to-go function is defined by
What influence might previous child sexual abuse - placement : What influence might previous child sexual abuse and/or placement in foster care have on teenagers who become parents? What do you think about the idea that in some families, teens are encouraged to have babies so the family can get government assis..
What would the dollar price of the automobile : Has the price, in dollars, of the automobile increased or decreased during the 25-year period because of changes in the exchange rate? What would the dollar price of the automobile be in May 2008, again assuming that the car's price changes only with..

Reviews

Write a Review

Finance Basics Questions & Answers

  What is tax advantage of the acquisition each year for baker

What is the maximum cash price Baker's would be willing to pay for Cuisinaire? 3. Do you recommend the acquisition? Why or why not?

  Which is more relevant-the pretax or after tax cost of debt

Dominos Corp. issued a 16-year, 6 percentsemiannual bond 2 years ago. The bond currently sells for 91percent of its face value. The company's tax rate is 35 percent,

  What was its average receivables balance

Dyl Pickle Inc. had credit sales of $3,600,000 last year and its days sales outstanding was DSO = 35 days. What was its average receivables balance, based on a 365-day year.

  Depreciation tax shield in the third year

What is the depreciation tax shield in the third year for this project? What is the present value of the CCA tax shield?

  Describe some of the short-term investment vehicles

Describe some of the short-term investment vehicles that you use to manage your cash resources. Why did you elect these vehicles over the alternatives? What are their primary advantages and disadvantages?

  How many shares will luther have outstanding

After the repurchase, how many shares will Luther have outstanding?

  The truck will have no effect on revenues but it is

you have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose

  Expected cost of financing a one-year loan

If the Russian Ruble borrowing rate is 30%, the expected cost of financing a one-year loan in Rubles would be what?

  Approaches for setting transfer prices

Describe and evaluate the various approaches for setting transfer prices. How can the use of different approaches between the selling and buying divisions be reconciled?

  Using a company of your choice determine the strategic

using a company of your choice determine the strategic business goals. develop an it strategy that aligns to the

  Considering the purchase of additional life insurance

Richard, age 35, is married and has two children, ages 2 and 5. He is considering the purchase of additional life insurance. He has the following financial goals and objectives:

  What is the net present value of the refunding

The call premium would be 7.50% of the face amount. New 20 year, 6%, semiannual payment, bonds can be sold at par, but flotation costs on this issue would be 3.0% of the amount of bonds sold. What is the net present value of the refunding? Note th..

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!

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