Sandrine Machinery is a Swiss multinational manufacturing company. Currently, Sandrine's financial planners are considering undertaking a 1-year project in the United States. The project's expected dollar-denominated cash flows consist of an initial investment of $2000 and a cash inflow the following year of $2400. Sandrine estimates that its risk-adjusted cost of capital is 12%. Currently, 1 U.S. dollar will buy 0.7 Swiss franc. In addition, 1-year risk-free securities in the United States are yielding 7%, while similar securities in Switzerland are yielding 4.5%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Do not round intermediate calculations.
If this project was instead undertaken by a similar U.S.-based company with the same risk-adjusted cost of capital, what would be the net present value and rate of return generated by this project? Round your answers to two decimal places.
NPV = $
Rate of return = %
What is the expected forward exchange rate 1 year from now? Round your answer to two decimal places.
SF per U.S. $
If Sandrine undertakes the project, what is the net present value and rate of return of the project for Sandrine? Do not round intermediate calculations. Round your answers to two decimal places.
NPV = Swiss Francs
Rate of return = %
In: Finance
Sandrine Machinery is a Swiss multinational manufacturing company. Currently, Sandrine's financial planners are considering undertaking a 1-year project in the United States. The project's expected dollar-denominated cash flows consist of an initial investment of $2000 and a cash inflow the following year of $2400. Sandrine estimates that its risk-adjusted cost of capital is 12%. Currently, 1 U.S. dollar will buy 0.74 Swiss franc. In addition, 1-year risk-free securities in the United States are yielding 6.5%, while similar securities in Switzerland are yielding 4.5%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Do not round intermediate calculations.
a.If this project was instead undertaken by a similar U.S.-based company with the same risk-adjusted cost of capital, what would be the net present value and rate of return generated by this project? Round your answers to two decimal places.
NPV= ?
Rate of Return=?
b.What is the expected forward exchange rate 1 year from now? Round your answer to two decimal places.
SF per U.S. $= ?
c.If Sandrine undertakes the project, what is the net present value and rate of return of the project for Sandrine? Do not round intermediate calculations. Round your answers to two decimal places.
NPV = ? Swiss Francs
Rate of Return= ?
In: Finance
*Excel formulas needed* A U.S.-based firm is considering a six- year project in Colombia. The following information is available about the project: Initial investment. The initial investment of USD 750,000 is used to purchase capital equipment. This equipment will be depreciated straight line to zero. At the end of six years, the remaining equipment will be sold for Colombian Peso (COP) 25,000,000. Working capital. The investment in working capital is COP 100,000,000. There are no changes in working capital until the end of the project when the full amount is recovered. Units, price, and costs. The firm will produce 2000 units of a product annually. The selling price is expected to be COP 599000 in the first year. This price is expected to increase at a rate of 4 percent annually. The direct expense per unit is expected to be COP 200000 in the first year. This is expected to increase at a rate of 5 percent annually. Indirect expenses are expected to be COP 50,000,000 annually. Taxes and miscellaneous. Colombian taxes on income and capital gains are 34 percent. There are no additional withholding taxes. All cash flows are repatriated when generated, and there are no additional U.S. taxes. The parity conditions are assumed to hold between Colombia and the United States. The relevant inflation indexes indicate a rate of 3 percent for the United States and 6 percent for Colombia. Spot USDCOP equals 3300. Brady’s USD denominated WACC is 12 percent.
a. Calculate COP cash flows
EXCEL FORMULAS only please. It will be incorrect if not run through Excel.
Thanks in advanced!
In: Finance
An improvement in technology
| a. |
will always result in a parallel shift of the production possibilities frontier |
|
| b |
will never result in a parallel shift of the production possibilities frontier |
|
| c |
will be indicated as a movement along the production possibilities frontier |
|
| d |
will shift the production possibilities frontier outward but not necessarily to a parallel position |
|
| e |
may not shift the production possibilities frontier |
(2) Economic fluctuations
| a |
are linked, but not perfectly synchronized, across countries |
|
| b |
are perfectly synchronized across countries |
|
| c |
in one country are independent of fluctuations in other countries |
|
| d |
in the United States always lag behind fluctuations in other developed economies |
|
| e |
in the United States usually occur before fluctuations in other developed economies |
3) "Efficiency" refers to
| a |
producing output using the least amount of labor |
|
| b |
producing output using the least amount of capital |
|
| c |
producing as far inside the production possibilities frontier as possible |
|
| d |
producing only one out of many possible commodities |
|
| e |
getting the maximum possible output from available resources |
4) An increase in the price level will cause
| a |
an increase in the quantity of aggregate output supplied |
|
| b |
a decrease in the quantity of aggregate output supplied |
|
| c |
a leftward shift of the aggregate supply curve |
|
| d |
a rightward shift of the aggregate supply curve |
|
| e |
a leftward or rightward shift of the aggregate supply curve, depending on the reason for the price change |
In: Economics
1. Which of the following statements is (are) correct?
(x) Business cycles are fluctuations in real GDP and related
economic variables such as investment and unemployment that occur
over time.
(y) A short period of falling incomes and rising unemployment is
called a recession and a short period of rising incomes and falling
unemployment is called an expansion.
(z) During recessions firms may find that they are unable to sell
all they produce and, as a consequence, workers are laid off.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (x) only
2. Which of the following statements about the United States is
(are) correct?
(x) In the United States, investment is a small part of real GDP
compared to consumption, yet it accounts for a large share of the
fluctuation in real GDP.
(y) Spending on new factories and housing typically rises during
economic expansions in the U.S.
(z) The rapid increase in asset prices, including stocks and
capital equipment, was a probable cause of the Great Depression in
the U.S.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (x) only
3. The overall price level in the U.S. is measured by the
A. rate of inflation.
B. rate of deflation.
C. CPI or the GDP deflator.
D. price of some particular commodity or service.
E. Either A or B
In: Economics
In: Psychology
|
Lakonishok Equipment has an investment opportunity in Europe. The project costs €12 million and is expected to produce cash flows of €2.7 million in year 1, €3.6 million in year 2, and €3.7 million in year 3. The current spot exchange rate is $1.13/€; the current risk-free rate in the United States is 4.4 percent, compared to that in Europe of 5 percent. The appropriate discount rate for the project is estimated to be 18 percent, the U.S. cost of capital for the company. In addition, the subsidiary can be sold at the end of three years for an estimated €8.3 million. What is the NPV of the project? |
Multiple Choice
$-2,931,556.43
$11,459.60
$11,917.98
$11,001.22
$391,852.70
|
Use the information below to answer the following questions. |
| Currency per U.S. $ | |
| U.K. Pound | 0.5135 |
| 6-months forward (£) | 0.5204 |
| Japan Yen | 108.21 |
| 6-months forward (¥) | 106.96 |
| Switzerland Franc | 1.0492 |
| 6-months forward (SF) | 1.0478 |
| Suppose interest rate parity holds, and the current six-month risk-free rate in the United States is 5.3 percent. |
| What must the six-month risk-free rate be in Great Britain? |
|
| What must the six-month risk-free rate be in Japan? |
|
| What must the six-month risk-free rate be in Switzerland? |
|
In: Finance
Fabulous discussion so far, the examples that you guys provided about the decisions that you had to make are great and diverse, and surely demonstrate the dilemma of scarcity and unlimited wants (utilities), as well as the dilemma of weighing costs against current or future actual (or perceived) benefits when making choices.
The society as a whole in any given country faces similar challenges due to the fact that each society has limited resources but has unlimited wants. As strange as it might sound, when countries go to large scale wars, such as WWI and WWII for example, one of the main changes in their “production” is the increase in the production of children, as well as war materials- tanks, planes, bombs, etc. During peace time and economic progress, people produce less children and the opportunity cost of having a child typically rises (more jobs for women with high pay means higher cost of having a child and/or being a stay at home mom). In such, societies alter their production process (production possibility frontier) as the resources and the wants of their people change.
Pick either a country/region outside the United States or a state, a region, or a city within the United States and discuss what is the major good or service that country, region, state, or city produces and why.
Also, what are the challenges that county, region, state, or city faces given its current resources.
In: Economics
Sandrine Machinery is a Swiss multinational manufacturing company. Currently, Sandrine's financial planners are considering undertaking a 1-year project in the United States. The project's expected dollar-denominated cash flows consist of an initial investment of $2,000 and a cash inflow the following year of $2,400. Sandrine estimates that its risk-adjusted cost of capital is 9%. Currently, 1 U.S. dollar will buy 0.98 Swiss franc. In addition, 1-year risk-free securities in the United States are yielding 4.6%, while similar securities in Switzerland are yielding 2.3%.
If this project was instead undertaken by a similar U.S.-based company with the same risk-adjusted cost of capital, what would be the net present value and rate of return generated by this project? Round the net present value to the nearest cent and rate of return to two decimal places.
NPV = $
Rate of return = %
What is the expected forward exchange rate 1 year from now? Do not round intermediate calculations. Round your answer to two decimal places.
Swiss franc (SFr) per U.S. $
If Sandrine undertakes the project, what is the net present value and rate of return of the project for Sandrine? Do not round intermediate calculations. Round the net present value to the nearest cent and rate of return to two decimal places.
NPV = Swiss francs
Rate of return = %
In: Finance
Sandrine Machinery is a Swiss multinational manufacturing company. Currently, Sandrine's financial planners are considering undertaking a 1-year project in the United States. The project's expected dollar-denominated cash flows consist of an initial investment of $2,000 and a cash inflow the following year of $2,400. Sandrine estimates that its risk-adjusted cost of capital is 8%. Currently, 1 U.S. dollar will buy 0.85 Swiss franc. In addition, 1-year risk-free securities in the United States are yielding 2.6%, while similar securities in Switzerland are yielding 1.3%.
If this project was instead undertaken by a similar U.S.-based company with the same risk-adjusted cost of capital, what would be the net present value and rate of return generated by this project? Round the net present value to the nearest cent and rate of return to two decimal places.
NPV = $----------------
Rate of return =---------------------- %
What is the expected forward exchange rate 1 year from now? Do not round intermediate calculations. Round your answer to two decimal places.
------------Swiss franc (SFr) per U.S. $
If Sandrine undertakes the project, what is the net present value and rate of return of the project for Sandrine? Do not round intermediate calculations. Round the net present value to the nearest cent and rate of return to two decimal places.
NPV = ---------- Swiss francs
Rate of return =---------- %
In: Finance