Question
In: Finance
An Australian company is considering a three month short-term investment of 10,000AUD in either Australia or...
An Australian company is considering a three month short-term investment of 10,000AUD in either Australia or Switzerland. The following information is available
Initial spot exchange rate (AUD/CHF) 1.0775-1.0825
Australian three month LIBOR rate (deposit – loan) 4.75-5.25% p.a.
Swiss three month LIBOR rate (deposit – loan) 2.25-2.75% p.a.
Australian lending/borrowing spread +1.5%p.a.
Swiss lending/borrowing spread +0.5%p.a.
If the ending spot exchange rate (AUD/CHF) is expected to be 1.0875-1.0925, which financing option should be taken.
If the ending spot exchange rate turned out to be (AUD/CHF) 1.0675-1.0725, would your decision have been profitable.
Solutions
jeff jeffy answered 1 year agoRelated Solutions
An Australian company is considering a three month short-term investment of 10,000AUD in either Australia or...
An Australian company is considering a three month short-term
investment of 10,000AUD in either Australia or Switzerland. The
following information is available
Initial spot exchange rate (AUD/CHF) 1.0775-1.0825
Australian three month LIBOR rate (deposit – loan) 4.75-5.25%
p.a.
Swiss three month LIBOR rate (deposit – loan) 2.25-2.75%
p.a.
Australian lending/borrowing spread +1.5%p.a.
Swiss lending/borrowing spread +0.5%p.a.
Required: (a) If the ending spot exchange rate (AUD/CHF) is
expected to be 1.0875-1.0925, which financing option should be
taken.
(b) If the ending...
Recommend three investment objectives for short-term investments.
Recommend three investment objectives for short-term
investments.
U3 Company is considering three long-term capital investment proposals. Each investment has a useful life of...
U3 Company is considering three long-term capital investment
proposals. Each investment has a useful life of 5 years. Relevant
data on each project are as follows.
Project Bono
Project
Edge
Project
Clayton
Capital investment
$ 164,800
$ 180,250
$ 204,000
Annual net income:
Year 1
14,420
18,540
27,810
2
14,420
17,510
23,690
3
14,420
16,480
21,630
4
14,420
12,360
13,390
5
14,420
9,270
12,360
Total
$ 72,100
$ 74,160
$ 98,880
Depreciation is computed by the straight-line method with no
salvage...
U3 Company is considering three long-term capital investment proposals. Each investment has a useful life of...
U3 Company is considering three long-term capital investment
proposals. Each investment has a useful life of 5 years. Relevant
data on each project are as follows. I got all the answers by my
computation for average rate of return Is wrong
Project
Bono
Project Edge
Project
Clayton
Capital
investment
$164,800
$180,250
$206,000
Annual net
income:
Year 1
14,420
18,540
27,810
2
14,420
17,510
23,690
3
14,420
16,480
21,630
4
14,420
12,360
13,390
5
14,420
9,270
12,360
Total
$72,100
$74,160
$98,880
Depreciation...
Henkel Company is considering three long-term capital investment proposals. Each investment has a useful life of...
Henkel Company is considering three long-term capital
investment proposals. Each investment has a useful life of 5 years.
Relevant data on each project are as follows.
Project Kilo
Project Lima
Project Oscar
Capital investment
$165,850
$176,550
$200,850
Annual net income:
Year
1
13,910
18,725
29,425
2
13,910
17,655
24,075
3
13,910
16,585
23,005
4
13,910
12,305
14,445
5
13,910
9,095
13,375
Total
$69,550
$74,365
$104,325
Depreciation is computed by the straight-line method with no
salvage value. The company’s cost...
U3 Company is considering three long-term capital investment proposals. Each investment has a useful life of...
U3 Company is considering three long-term capital investment
proposals. Each investment has a useful life of 5 years. Relevant
data on each project are as follows.
Project Bono
Project Edge
Project Clayton
Capital investment
$161,600
$176,750
$204,000
Annual net income:
Year 1
14,140
18,180
27,270
2
14,140
17,170
23,230
3
14,140
16,160
21,210
4
14,140
12,120
13,130
5
14,140
9,090
12,120
Total
$70,700
$72,720
$96,960
Depreciation is computed by the straight-line method with no
salvage value. The company’s cost of capital...
U3 Company is considering three long-term capital investment proposals. Each investment has a useful life of...
U3 Company is considering three long-term capital investment
proposals. Each investment has a useful life of 5 years. Relevant
data on each project are as follows. Project Bono Project Edge
Project Clayton Capital investment $174,400 $190,750 $218,000
Annual net income: Year 1 15,260 19,620 29,430 2 15,260 18,530
25,070 3 15,260 17,440 22,890 4 15,260 13,080 14,170 5 15,260 9,810
13,080 Total $76,300 $78,480 $104,640 Depreciation is computed by
the straight-line method with no salvage value. The company’s cost
of...
U3 Company is considering three long-term capital investment proposals. Each investment has a useful life of...
U3 Company is considering three long-term capital investment
proposals. Each investment has a useful life of 5 years. Relevant
data on each project are as follows.
Project Bono
Project
Edge
Project
Clayton
Capital investment
$ 171,200
$ 187,250
$ 202,000
Annual net income:
Year 1
14,980
19,260
28,890
2
14,980
18,190
24,610
3
14,980
17,120
22,470
4
14,980
12,840
13,910
5
14,980
9,630
12,840
Total
$ 74,900
$ 77,040
$ 102,720
Depreciation is computed by the straight-line method with no
salvage...
U3 Company is considering three long-term capital investment proposals. Each investment has a useful life of...
U3 Company is considering three long-term capital investment
proposals. Each investment has a useful life of 5 years. Relevant
data on each project are as follows.
Project Bono
Project Edge
Project Clayton
Capital investment
$164,800
$180,250
$202,000
Annual net income:
Year 1
14,420
18,540
27,810
2
14,420
17,510
23,690
3
14,420
16,480
21,630
4
14,420
12,360
13,390
5
14,420
9,270
12,360
Total
$72,100
$74,160
$98,880
Depreciation is computed by the straight-line method with no
salvage value. The company’s cost of capital...
Swifty Company is considering three long-term capital investment proposals. Each investment has a useful life of...
Swifty Company is considering three long-term capital investment
proposals. Each investment has a useful life of 5 years. Relevant
data on each project are as follows.
Project Bono
Project Edge
Project Clayton
Capital investment
$164,800
$180,250
$204,000
Annual net income:
Year 1
14,420
18,540
27,810
2
14,420
17,510
23,690
3
14,420
16,480
21,630
4
14,420
12,360
13,390
5
14,420
9,270
12,360
Total
$72,100
$74,160
$98,880
Depreciation is computed by the straight-line method with no
salvage value. The company’s cost of capital...
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