Trefor, a US firm, has a sterling (£) receivable of £300,000 from a UK customer due one year from now. Trefor has no use for sterling currency and will exchange the receipt into US dollars ($). The spot exchange rate now is £1=$1.34 and the one- year forward exchange rate is £1=$1.31. Assume the forecasted spot rate in one year’s time is £1=$1.28 or £1=$1.38, with equal probability. The discount rate is zero.

0. (a) What is the expected dollar value of Trefor’s receivable if it chooses:

   1. (i) not to hedge the receipt?

   2. (ii) to use a forward hedge?

1. (b) One year sterling put options and sterling call options are available at a cost of

   $0.03 per £ with an exercise price of £1.32.

   1. (i) How could Trefor make use of an option hedge for its sterling receivable?

   2. (ii) What will be the expected value in dollars of the outcome of the option hedge?

2. (c) If Trefor is concerned only about downside risk, is it better to choose the forward hedge or the option hedge? Explain. (60 words)

3. (d) An alternative hedging strategy for Trefor is to use futures contracts. Are there any advantages to using futures instead of a forward exchange extract? Explain. (60 words)

4. (e) Briefly discuss the implications of the Capital Asset Pricing Model for the relationship between the current spot price of an asset and the discount offered by the seller of a futures contract.

I'll give good rating please help.

Taxation Assignment:

XXX Ltd is a UK resident trading company. The company's statement of profit or loss for the year ended 31 March 2018 is as follows:                                                                            

   £                         £

Gross profit                                                                              1,200,500
Other income
     Loan stock interest (note 1)                                                   15,750
     Rental income (note 2)                                                          24,000
Expenses
     Salaries                                                        282,000
     Depreciation                                                 70,500
     Loss on sale of non-current asset                   2,500
     Impairment losses (all trade)                         3,800
     Professional fees (note 3)                              14,300
     Repairs and renewals (note 4)                       18,700
     Other expenses (note 5)                                28,500
                                                                                                                  (420,300)
Finance costs                                                                           
     Loan interest (note 6)                                                            (15,300)
Profit before taxation                                                                804,650

Notes:

1 Loan stock interest
The loan stock interest is in respect of loan stock held by XXX Ltd as an investment. The
amount of £15,750 is the amount received and accrued to 31 March 2018.

2 Rental income
The rental income is in respect of a warehouse which is held as an investment and is let out to an
unconnected company. The rental received of £24,000 is also the amount accrued to
31 March 2018.

3 Professional fees

Professional fees are as follows:
                                                                                              £

Accountancy and audit fees                                                       5,600
Debt collection of trade debts                                                    5,100
Legal fees in connection with renewing a 25 year lease               1,300
Legal fees in connection with director's motoring offences           2,300
                                                                                           14,300

4 Repairs and renewals

Repairs and renewals include:
                                                                                               £
Extension to factory                                                                   9,988
Repainting exterior of company's offices                                     4,500

5 Other expenses

Other expenses include:

                                                                                                          £
100 pens with an advertisement for company, given to customers           1,200

Qualifying charitable donation                                                                6,000


6 Loan interest
The loan interest relates to the warehouse let out (see note (2)). The amount shown is the amount
paid and accrued to 31 March 2018.

REQUIRED:    

What are XXX Ltd's trading profits for the year ended 31 March 2018? Start with the profit before taxation figure of £804,650 and list all of the items in the statement of profit or loss indicating by the use of a zero (0) any items that do not require adjustment.     

What are XXX Ltd's taxable total profits for the year ended 31 March 2018?

What are XXX Ltd's net profit after tax for the year ended 31 March 2018?

Firm ABC is a UK based retailer and Firm XYZ is an Italian manufacturer.

Firm ABC is planning to open a number of retail stores in France and wants to borrow €60 million for 4 years to fund this.

Firm XYZ has an opportunity to acquire a competitor located in the UK and wishes to borrow ₤50 million for 4 years to fund this acquisition.

The current spot FX rate is S(EUR/GBP)=1.20. The annual borrowing rates available to the firms by issuing four year fixed rate bonds are below:

B2 (b) Suppose that ABC and XYZ both decide to enter into a fixed-for-fixed cross currency swap. Imagine you are a swap bank intermediating between the two firms. You are asked to design a fixed-for-fixed cross currency swap for each firm with the following features:

• Both firms achieve their desired borrowing with no additional FX exposure.
• The annual interest savings by both firms relative to borrowing directly are equal.
• The swap bank profit (on an annual basis) is equal to the interest savings by the firms.

Find the bid and ask rates that the swap bank provides for both € and ₤ that generate these features and calculate the savings or profits of all parties.

B2 (b) Now suppose that the two firms instead entered into a direct fixed-for-fixed cross-currency interest rate swap with each other. This swap has the following features:

• ABC pays 4.0% on EUR 60 million over 4 years to XYZ
• XYZ pays 5.2% on GBP 50 million over 4 years to ABC
• The firms exchange principals as part of this swap
• The value of the swap is zero at inception.

In one year's time, the market swap rates are 4.1% for the Euro payments, and 5.4% for the Pound payments. The exchange rate in one year's time is S(EUR/GBP)=1.25. Calculate the new value of the swap. Which party would be required to compensate the other in order to terminate the swap?

3. Trefor, a US firm, has a sterling (£) receivable of £300,000 from a UK customer due one year from now. Trefor has no use for sterling currency and will exchange the receipt into US dollars ($). The spot exchange rate now is £1=$1.34 and the oneyear forward exchange rate is £1=$1.31. Assume the forecasted spot rate in one UL20/0419 Page 5 of 8 year’s time is £1=$1.28 or £1=$1.38, with equal probability. The discount rate is zero. (a) What is the expected dollar value of Trefor’s receivable if it chooses: (i) not to hedge the receipt? (ii) to use a forward hedge? (b) One year sterling put options and sterling call options are available at a cost of $0.03 per £ with an exercise price of £1.32. (i) How could Trefor make use of an option hedge for its sterling receivable? (ii) What will be the expected value in dollars of the outcome of the option hedge? (c) If Trefor is concerned only about downside risk, is it better to choose the forward hedge or the option hedge? Explain. (60 words) (d) An alternative hedging strategy for Trefor is to use futures contracts. Are there any advantages to using futures instead of a forward exchange extract? Explain. (60 words) (e) Briefly discuss the implications of the Capital Asset Pricing Model for the relationship between the current spot price of an asset and the discount offered by the seller of a futures contract. (100 words)

Trefor, a US firm, has a sterling (£) receivable of £300,000 from a UK customer due one year from now. Trefor has no use for sterling currency and will exchange the receipt into US dollars ($). The spot exchange rate now is £1=$1.34 and the oneyear forward exchange rate is £1=$1.31. Assume the forecasted spot rate in one UL20/0419 Page 5 of 8 year’s time is £1=$1.28 or £1=$1.38, with equal probability. The discount rate is zero.

(a) What is the expected dollar value of Trefor’s receivable if it chooses:

(i) not to hedge the receipt?

(ii) to use a forward hedge?

(b) One year sterling put options and sterling call options are available at a cost of $0.03 per £ with an exercise price of £1.32.

(i) How could Trefor make use of an option hedge for its sterling receivable?

(ii) What will be the expected value in dollars of the outcome of the option hedge?

(c) If Trefor is concerned only about downside risk, is it better to choose the forward hedge or the option hedge? Explain. (60 words)

(d) An alternative hedging strategy for Trefor is to use futures contracts. Are there any advantages to using futures instead of a forward exchange extract? Explain. (60 words)

(e) Briefly discuss the implications of the Capital Asset Pricing Model for the relationship between the current spot price of an asset and the discount offered by the seller of a futures contract. (100 words)

Trefor, a US firm, has a sterling (£) receivable of £300,000 from a UK customer due one year from now. Trefor has no use for sterling currency and will exchange the receipt into US dollars ($). The spot exchange rate now is £1=$1.34 and the oneyear forward exchange rate is £1=$1.31. Assume the forecasted spot rate in one year’s time is £1=$1.28 or £1=$1.38, with equal probability. The discount rate is zero.

(a) What is the expected dollar value of Trefor’s receivable if it chooses:

(i) not to hedge the receipt?

(ii) to use a forward hedge?

(b) One year sterling put options and sterling call options are available at a cost of $0.03 per £ with an exercise price of £1.32.

(i) How could Trefor make use of an option hedge for its sterling receivable?

(ii) What will be the expected value in dollars of the outcome of the option hedge?

(c) If Trefor is concerned only about downside risk, is it better to choose the forward hedge or the option hedge? Explain. (60 words)

(d) An alternative hedging strategy for Trefor is to use futures contracts. Are there any advantages to using futures instead of a forward exchange extract? Explain. (60 words)

(e) Briefly discuss the implications of the Capital Asset Pricing Model for the relationship between the current spot price of an asset and the discount offered by the seller of a futures contract. (100 words)

EXCEL

Pecan Peanuts makes packets of nuts in its factory in the UK and currently uses two machines to fill the packets. A sample of 30 packets from the first machine has a mean weight of 180 g and a standard deviation of 40 g. A sample of 40 packets from the second machine has a mean weight of 170 g and a standard deviation of 10 g.

State the six-point procedure for hypothesis testing and test if the two machines are comparable in terms of putting the same amount in packets?

Insert six-point procedure, calculation and summarise result approx. 300 words - use cell for calculation( excel formulas to get the results).

A leading UK Chocolate Brand has seen a downturn in sales due to new competition in the

market. Analysis work has shown the need for a customer loyalty programme. You have been

tasked with designing the approach that your Partner will present to the Client.

One Page Project Summary including;

▪

The purpose of the assignment and the outline of the

task

▪

The core deliverables expected from the engagement

▪

The make up of your Consulting Delivery Team

One Page High

-

Level market summary, including;

▪

The market size

▪

Core competition in the market

▪

Challenges faced by the industry

One Page Solution Overview, including;

▪

Your proposed solution to the problem statement

▪

Your justification for your solution

▪

Expected outcomes / ROI if the Client goes ahead with

your suggestion

One Page Implementation Plan, including;

▪

A One Page Project Plan

▪

Your change management approach to ensure

seamless integration

Trefor, a US firm, has a sterling (£) receivable of £300,000 from a UK customer due one year from now. Trefor has no use for sterling currency and will exchange the receipt into US dollars ($). The spot exchange rate now is £1=$1.34 and the one-year forward exchange rate is £1=$1.31. Assume the forecasted spot rate in one year’s time is £1=$1.28 or £1=$1.38, with equal probability. The discount rate is zero.

(a) What is the expected dollar value of Trefor’s receivable if it chooses:

(i) not to hedge the receipt?

(ii) to use a forward hedge?

(b) One year sterling put options and sterling call options are available at a cost of $0.03 per £ with an exercise price of £1.32.

(i) How could Trefor make use of an option hedge for its sterling receivable?

(ii) What will be the expected value in dollars of the outcome of the option hedge?

(c) If Trefor is concerned only about downside risk, is it better to choose the forward hedge or the option hedge? Explain. (60 words)

(d) An alternative hedging strategy for Trefor is to use futures contracts. Are there any advantages to using futures instead of a forward exchange extract? Explain. (60 words)

(e) Briefly discuss the implications of the Capital Asset Pricing Model for the relationship between the current spot price of an asset and the discount offered by the seller of a futures contract. (100 words)

BURN PLC is a North Sea (UK) oil and gas company listed on the London Stock Exchange and financed by both debt and equity. The market value of the debt on the company’s account is £60 million and the market value of equity is £40 million. Suppose the firm has a market cost of debt of 4%; a market cost of equity of 7%; and that their corporate tax rate is 20%. GREEN PLC is a Brazilian solar energy company, listed on the Brazilian Stock Exchange, also with 60% debt and 40% equity. Suppose GREEN PLC has a market cost of debt of 6%; a market cost of equity of 15%; and that their corporate tax rate is 40%; and that BURN PLC has an equity Beta of 0.8.

1. BURN PLC is considering a merger with GREEN PLC. Assume that BURN PLC is the larger company. From the perspective of BURN PLC, discuss five advantages and disadvantages of the merger