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While you were visiting London, you purchased a Jaguar for £35,000, payable in three months. You have enough cash at your bank in New York City, which pays 0.35% interest per month, compounding monthly, to pay for the car. Currently, the spot exchange rate is $1.45/£ and the three-month forward exchange rate is $1.40/£. In London, the money market interest rate is 2.0% for a three-month investment.
There are two alternative ways of paying for your Jaguar.
(a) Keep the funds at your bank in the U.S. and buy £35,000 forward.
(b) Buy a certain pound amount spot today and invest the amount in the U.K. for three months so that the maturity value becomes equal to £35,000.
Evaluate each payment method. Which method would you prefer? Why?
The Peace River Corporation has 62,000 shares of stock outstanding at a market price of $48 a share. The company has just announced a 3-for-2 stock split. How many shares of stock will be outstanding after the split?
the treasurer of the stewart company mr. johns has been asked to submit his assessment of the feasibility of
Calculate the minimum cash flow that could be received at the end of year three to make the following project acceptable. Initial cost is $100,000; cash flows at end of years one and two is $35,000.
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which financial statement(s) and financial ratios would you be most concerned with? Which would provide the most relevant information about a firm's ability to repay its loan?
Calculate the expected profit for each category assuming that sales is 5 200. The costs for this size sale is $4 500. The costs occur in the beginning of the year. What category should the company sell to?
Zinger Corp. has bonds outstanding at 6%, but its investment banker has informed the company that interest rates for bonds of equal risk are currently yielding 5%. Zinger's tax rate is 40%.
if a transaction gives rise to an extraordinary loss of 100000 and the company is subject to a tax rate of 40 the
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What is the difference between shareholder reporting and tax reporting of profits?
a firm evaluates all of its projects by applying the irr rule. a project under consideration has the following cash
Kessen Inc.'s bonds mature in 7 years, have a par value of $1,000, and make an annual coupon payment of $70. The market interest rate for the bonds is 8.5%. Should an investor decide to purchase this bond today, would the bond be priced at a premi..
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