Question

In: Finance

An ounce of gold currently costs 5100 shekels in Tel Aviv and $1,450 in Dollars. The...

An ounce of gold currently costs 5100 shekels in Tel Aviv and $1,450 in Dollars. The shekel inflation rate is 13%, and the dollar inflation rate is 2.5%. You are considering opening a semiconductor plant in Israel. Setting up manufacturing will cost 25,000,000 shekels today and 25,000,000 shekels 2 years from today. You will receive payments of 40,000,000 shekels one, two and three years from today. Your US dollar cost of equity is 11%. Assume that there is no arbitrage in any markets there are no taxes, and that this project is 100% equity financial.

a. What should the exchange rate between dollars and shekels be today?

b. What should the exchange rate one, two and three year from today? Please us exact formula not the approximate formula.

c. That the NPV of this project to US shareholders who demand payment in US dollar?

Solutions

Expert Solution


Related Solutions

Currently, an ounce of gold costs USD 1715, and CHF 1673. One year ago, it cost...
Currently, an ounce of gold costs USD 1715, and CHF 1673. One year ago, it cost USD 1681, and CHF 1648. Assume the Law of One Price holds for this question. 2A. What is the current spot rate between USD and CHF? 2B. What is the USD inflation rate? 2C. What is the CHF inflation rate? 2D. What would you expect the USD to CHF spot rate to be in 1 year?
With the market price of gold at ​C$1,562.50 per ounce​ (C$ stands for Canadian​ dollars), Maritime...
With the market price of gold at ​C$1,562.50 per ounce​ (C$ stands for Canadian​ dollars), Maritime Resources​ Corp., a Canadian mining​ firm, would like to assess the financial feasibility of reopening an old gold mine that had ceased operations in the past due to low gold prices. Reopening the mine would require an​ up-front capital expenditure of ​C$67.9 million and annual operating expenses of ​C$19.43 million. Maritime expects that over a​ 5-year operating life it can recover 174, 000 ounces...
Toothpaste The table shows the costs per ounce (in dollars) for a sample of toothpastes exhibiting...
Toothpaste The table shows the costs per ounce (in dollars) for a sample of toothpastes exhibiting very good stain removal, good stain removal, and fair stain removal. At α = 0.05, can you conclude that at least one mean cost per ounce is different from the others? Very Good .47 .49 .41 .37 .48 .51 Good .60 .64 .58 .75 .46 Fair .34 .46 .44 .60
12. Toothpaste The table shows the costs per ounce (in dollars) for a sample of toothpastes...
12. Toothpaste The table shows the costs per ounce (in dollars) for a sample of toothpastes exhibiting very good stain removal, good stain removal, and fair stain removal. At α = 0.05, can you conclude that at least one mean cost per ounce is different from the others? Using SPSS!!! Very Good .47 .49 .41 .37 .48 .51 Good .60 .64 .58 .75 .46 Fair .34 .46 .44 .60
Gold is currently trading for about 1,650 per ounce. You are considering 3 ways of taking...
Gold is currently trading for about 1,650 per ounce. You are considering 3 ways of taking a short position on gold: (i) sell 100 ounces of gold short, (ii) take a short position in 1000 gold futures (October 2020), (iii) buy a futures put options on 1000 gold futures at K=1650 (October 2020). (a) If you enter the above positions when gold equals 1,650, compare the dollars in profit from the three ways of betting against the price of gold...
The current price of gold is $1688 per ounce. The volatility of gold price is 20%...
The current price of gold is $1688 per ounce. The volatility of gold price is 20% per annum. The continuously-compounded risk-free rate is 5% per annum. What is the value of a 3-month call option on an ounce of gold with a strike price of $1750 according to the BSM model?
A trader can sell gold at $794.00 per ounce and buy it at $800.00 per ounce....
A trader can sell gold at $794.00 per ounce and buy it at $800.00 per ounce. The trader can invest money at 5.7% per year and borrow money at 6% per year, each compounded annually. For what range of two-year forward prices of gold does the trader have no arbitrage opportunity? Assume no storage costs.
Suppose the current price of gold is $1,440 an ounce. Hotshot Consultants advises you that gold...
Suppose the current price of gold is $1,440 an ounce. Hotshot Consultants advises you that gold prices will increase at an average rate of 14% for the next two years. After that the growth rate will fall to a long-run trend of 3% per year. Assume that gold prices have a beta of 0 and that the risk-free rate is 6%. What is the present value of 1.2 million ounces of gold produced in 10 years? WRITE YOUR ANSWER IN...
in 1996 an ounce of gold sold for $369 and for $1060 in 2015, what was...
in 1996 an ounce of gold sold for $369 and for $1060 in 2015, what was the change in the price of gold over this period?
The current spot price of gold is $1,780 per ounce (oz.)
The current spot price of gold is $1,780 per ounce (oz.). Storing gold costs $12 per oz. per year, and the storage costs are paid when the gold is taken out of storage. The risk-free rate is 5% per annum (continuously compounded).i) What is the futures price for gold delivery in three-month?ii) If the current futures price for delivery of gold in three-month is $1810 per oz., identify a riskless arbitrage strategy
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT