Question
In: Finance
The Copper Mountain Group, a private equity firm headquartered in Boulder, Colorado, borrows £4,500,000 for one...
The Copper Mountain Group, a private equity firm headquartered in Boulder, Colorado, borrows £4,500,000 for one year at 8.375% interest.
a. What is the dollar cost percent of this debt if the pound depreciates from $2.0210/£ to $1.9430/£ over the year?
b. What is the dollar cost percent of this debt if the pound appreciates from $2.0210/£ to $2.1620/£ over the year?
Solutions
Expert Solution
| Depreciating pound | Appreciating pound | ||
| Amount borrowed (£) | 4,50,00,000 | 4,50,00,000 | |
| r | Interest rate (£) p.a. | 8.375% | 8.375% |
| S1 | Spot rate ($/£) (Start of the year) | 2.0210 | 2.0210 |
| S2 | Spot rate ($/£) (End of the year) | 1.9430 | 2.1620 |
| Principcal P (£) | 4,50,00,000 | 4,50,00,000 | |
| (I = P*r) | Interest (£) | 37,68,750 | 37,68,750 |
| (A = P+I) | Amount due at the end of the year (£) | 4,87,68,750 | 4,87,68,750 |
| (A2 = A*S2) | Amount due ($) | 9,47,57,681.25 | 10,54,38,037.50 |
| (A1 = A*S1) | Amount borrowed ($) | 9,09,45,000.00 | 9,09,45,000.00 |
| (A2/A1 -1) | US dollar cost of debt | 4.1923% | 15.9360% |
jeff jeffy answered 1 year agoRelated Solutions
The Copper Mountain Group, a private equity firm headquartered in Boulder, Colorado, borrows £4,500,000 for one...
The Copper Mountain Group, a private equity firm headquartered
in Boulder, Colorado, borrows £4,500,000 for one year at 7.875%
interest.
a. What is the dollar cost of this debt if the pound depreciates
from $2.0270/£ to $1.9450/£ over the year?
b. What is the dollar cost of this debt if the pound appreciates
from $2.0270/£ to $2.1630/£ over the year?
Ravi, a fund manager working for a private equity firm headquartered in Singapore, is considering including...
Ravi, a fund manager working for a private equity firm
headquartered in Singapore, is considering including the following
stocks in the firm's portfolio:
Rate of Return
Probability
State of Economy
Stock RST
Stock VVR
Stock BAB
25%
Boom
0%
20%
40%
40%
Normal
6%
12%
15%
35%
Recession
15%
-4%
-26%
He plans to invest 40% of the portfolio funds in stock RST and
the balance equally between VVR and BAB. Beta of stock VVR is 0.15
higher than RST....
Describe the typical organization of a private equity firm. What are the main motivating factors that...
Describe the typical organization of a private equity firm. What
are the main motivating factors that result in this type of
organization?
What are the three main traits required of an analyst? What are
the keys to promotion for an analyst?
How does the associate job differ from the analyst job? What are
the keys to promotion for an associate?
How does the principal job differ from the associate job? What
are the keys to promotion for a principal?
What...
Describe the typical organization of a private equity firm. What are the main motivating factors that...
Describe the typical organization of a private equity firm. What
are the main motivating factors that result in this type of
organization?
What are the three main traits required of an analyst? What are
the keys to promotion for an analyst?
How does the associate job differ from the analyst job? What are
the keys to promotion for an associate?
How does the principal job differ from the associate job? What
are the keys to promotion for a principal?
What...
. You are considering buying equity in a firm. If you purchase the equity, in one...
. You are considering buying equity in a firm. If you purchase
the equity, in one year you will receive $1.5 million with 40%
probability and $1.2 million with 60% probability. Currently the
yield on one year T-bills is 4%. Suppose that you require a risk
premium of 10% to invest in the equity of this firm. In other
words, your minimum required return on this investment is 14%.
(a) What is the most you would be willing to pay...
Explain the impact of private equity firm acquisition of manufacturing and retail firms. Please answer the...
Explain the impact of private equity firm acquisition of
manufacturing and retail firms.
Please answer the above question No plagiarism and 400
words limit
A private equity firm is evaluating two alternative investments. Although the returns are random, each investments...
A private equity firm is evaluating two alternative investments.
Although the returns are random, each investments return can be
described using normal distribution. The first investment has a
mean return of $2,250,000 with a standard deviation of $125,000.
The second investment has a mean return of $2,525,000 with a
standard deviation of $500.000.
B). How likely is it that the Second investment will return
$2,100,000 or less?
The probability is _______
C). If the firm would like to limit the...
A private equity firm is evaluating two alternative investments. Although the returns are random, each investment's...
A private equity firm is evaluating two alternative investments.
Although the returns are random, each investment's return
can be described using a normal distribution. The first investment
has a mean return of $2000000 with a standard
deviation of $125000 . The second investment has a mean return of $
2275000 with a standard deviation of $ 300000 .
Complete parts a through c below.
a. How likely is it that the first investment will return
$1,800,000 or less?
The probability...
You run a small private equity firm that specializes in identifying profitable acquisitions. You have identified...
You run a small private equity firm that specializes in
identifying profitable acquisitions. You have identified the small,
poorly managed, but profitable company GreenWatches, which has the
following characteristics: ROE=7.5%, k=10%, b=60%, E1=3.
a. Just from these values, how do you know that GreenWatches is
poorly managed?
b. What is the price (intrinsic value) of the stock and what is
the current PVGO of the company? Why is the PVGO negative? You
believe that you can turn around the company...
Does it make sense to give employees in a recently privatized firm an equity share in the new private entity?
Does it make sense to give employees in a recently privatized firm an equity share in the new private entity?
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- identify one intrapersonal relationship and evaluate its component.
- Using Python in vs code: The distribution of letters in a document has a distinctive and...
- Why is De Beers exploring the diamond reselling market? How does the creation of IIDV affect...
- programming in Python The body mass index (BMI) is calculated as a person’s weight (in lb)...
- 1. Show the steps in merging A and B into C where A= 8, 12, 19,...
- 1. Given the following information, determine the beta coefficient for Stock L that is consistent with...
- Generate the first ten rows of Pascal triangle using MATLAB. Post code in the response
ADVERTISEMENT