Explain how purchasing power parity and international Fisher effect are used to forecast future or forward currency exchange rates between two countries.

How does the amount of the indirect bankruptcy costs influence the financial structure of a company?

Please show your working and formula (If possible)

--------------------------

Suppose you take out an $840,000, 20-year mortgage loan to buy a residential apartment. The interest rate on the mortgage is 4.65% per annum, and payments are required to be made annually at the end of each year.

Question:

Construct a mortgage amortisation table showing loan balance at the beginning of each period, annual repayment amount, interest payment, the amortisation of the loan and the loan balance for each year.

Question 1:

You are currently evaluating a new project for your company. The project requires an initial investment in equipment RM 90,000 and an investment in working capital of RM10,000 at the beginning (t=0). The project is expected to produce sales revenues of RM120, 000 for three years. Manufacturing costs are estimated to be 60% of the revenues. The asset is depreciated over the project’s life using straight-line depreciation method. At the end of the project (t=3), you can sell the equipment for RM10, 000. The corporate tax rate is 30% and the cost of capital is 15%. Should you accept the project? Why?

Question 2:

The market value of Chakrawala Corporation’s common stock is RM20 million and the market value of its risk-free debt is RM5 million. The beta of the company’s common stock is 1.25 and the market risk premium is 8%. If the Treasury bill rate is 5%, what is the company’s cost of capital? (Assume no tax).

Suppose that you are contemplating an investment in an apartment building.

Use the information provided below to answer the questions that follow:

Type of Property: Apartment Building Number of Units: 30

Average Rent: $1,500 per unit per month

Expected Growth in Rents: 5% per year

Vacancy and Collection Losses: 5% of Potential Gross Income

Other Income: $50 per unit per month

Expected Growth in Other Income: 3% per year

Operating Expenses: 35% of Effective Gross Income

Capital Expenditures: 4% of Effective Gross Income

Selling Expenses: 5% of Future Selling Price

Going-Out Cap Rate: 6.5%

Expected Purchase Price: $5.25 million

Loan Terms: Loan Amount: 85% of purchase price

Interest Rate: 4.5% per year with monthly payments and monthly compounding

Amortization Term: 30 years

a. What is the net present value of the before-tax unlevered cash flows if you assume a five-year holding period and a discount rate of 12%?

b. What is the internal rate of return of the before-tax levered cash flows if you still assume a five-year holding period?

14. You want to buy your first home and the bank officer says that the monthly mortgage payment can be up to a maximum of 40% of your monthly household gross income (monthly). Your household gross income is $85,000/year. According to this bank officer, what is your maximum monthly mortgage payment from this bank?

17. You purchased your condo for $220,000 5 years ago. The current market value is $300,000. You still owe $165,000 on the mortgage. If you can borrow up to 85% of the market value, what is the maximum amount you can borrow? SHOW all work please!

19. You would like to purchase a townhouse but would need to borrow $250,000 at 4% interest on a 30-year loan. The estimated annual property taxes would be $1600 and the estimated home insurance would be $800 annually. The townhouse association fee each month is $600. a) What is the monthly payment on principal and interest (just the mortgage payment)? Show all work for full credit.
b) Given all monthly expenses, what is the total monthly cost of the townhouse? Show all the work

Can increasing revenue overcome an increase in the percentage of food cost?

Scana Corporation is considering leasing a new equipment. The lease lasts for 5 years. The lease calls for 5 payments of $34,000 per year with the first payment occurring immediately. The equipment would cost $126,000 to buy and would be straight-line depreciated to a zero salvage value over 5 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 6.5%. The corporate tax rate is 25%. What is the NPV of the lease relative to the purchase if the asset had a pretax salvage value of $4,600 (ignoring any possible risk differences)?

Scana Corporation is considering leasing a new equipment. The lease lasts for 5 years. The lease calls for 5 payments of $34,000 per year with the first payment occurring immediately. The equipment would cost $126,000 to buy and would be straight-line depreciated to a zero salvage value over 5 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 6.5%. The corporate tax rate is 25%. What is the NPV of the lease relative to the purchase?

Scana Corporation is considering leasing a new equipment. The lease lasts for 5 years. The lease calls for 5 payments of $34,000 per year with the first payment occurring immediately. The equipment would cost $126,000 to buy and would be straight-line depreciated to a zero salvage value over 5 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 6.5%. The corporate tax rate is 25%. What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in year 2?

Some companies refrain from using financial derivatives to manage their foreign exchange exposures. They consider derivatives such as forwards, futures and options as speculative. They also believe the long-term effect is the same regardless of whether a firm hedges since hedging results in gains sometimes and losses other times.

• Do you agree with these companies? Why or why not?
• If you are faced with currency exposures in your business, will you hedge? If so, how will you hedge?

Bond prices and maturity dates. Moore Company is about to issue a bond with monthly coupon ​payments, an annual coupon rate of 8​%, and a par value of $5,000.The yield to maturity for this bond is 9​%

a. What is the price of the bond if it matures in 5​,10,15​,20 ​years?

b. hat do you notice about the price of the bond in relation to the maturity of the​ bond?

Would you describe the meltdown of Nortel more as a failure of “people” or of “capital market processes”?

what are legal issues that should be taken into account when you developing e-commerce