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.

1. 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 = %

2. What is the expected forward exchange rate 1 year from now? Round your answer to two decimal places.

   SF per U.S. $

3. 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 = %

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= ?

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%.

1. 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 =   %

2. 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 (SF_r) per U.S. $

3. 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 =   %

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%.

1. 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 =---------------------- %

2. 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 (SF_r) per U.S. $

3. 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 =---------- %

16.  Problem 19.17 (Foreign Capital Budgeting)

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 11%. 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%, while similar securities in Switzerland are yielding 1%.

1. 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 =   %

2. 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 (SF_r) per U.S. $

3. 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 =   %

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%.

1. 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 = ------------ %

2. 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 (SF_r) per U.S. $

3. 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 = ------------ %

Assume the following information about a company:

Past dividends

2015                $1.32                           Required return = 11%

2016                $1.44                          

2017                $1.54                          

2018                $1.66

2019                $1.76

Use the appropriate dividend model to place a value on this stock for 2020.

How do I set this up in excel?

Lucky Traders is a subsidiary of United Traders, a US based trading company with a 31
December year end, and it is involved in the buying and selling of electronic accessories. Most of
the inventories that Lucky Traders sells are imported from the parent company that is based in
America.
Given the nature of the business, Mr. Luckiness expresses his concern on the fact that the
company is trading with companies that are not local companies. The company has been
experiencing losses, because of this; Mr. Luckiness is concerned that the company’s functional
currency is US Dollars as the invoices that they receive are quoted in US Dollars.
The consultant company for Lucky Traders have recommended that the company should enter a
Foreword Exchange contract to hedge for the risk of the exchange rate.
On 1 December 2019 Lucky Traders entered into the contract with Take A Little an American
based company to supply to them 15 000 boxes of accessories when the exchange rate was $ 1:
NAD14.00 and each of the box worth US$ 1 589. The stock was shipped FOB on the 10th
December 2019 when the exchange rate was $1: NAD13.00.
Due to the delay in the customs and clearance of the orders stock only arrived at the premises of
Lucky Traders on 15 December 2019 when the exchange rate was $1:NAD16.00 the debt was
not settled as at 31 December 2019 and the final payment was only made on the 31 January
2020. When the exchange rate was $1: NAD 17.50 at 31 December 2019
The company entered the FEC contract with Capelex Bank to fix the rate on the 31 January 2020
at $1:NAD15.50. Due to the outbreak of Covid-19 US Dollar has strengthen and Namibian dollar
has declined and the rate moved to $1: NAD 18.00.

The Forward Exchange Contract had the rates below:
Date $:NAD
01/12/19 -
31/12/19 1:17.00
31/01/2020 1:21.00

Required:


2.3 Calculate total loss/gain made foreign exchange on the transaction above for the
year ended 31 December 2019

2.4 Prepare the journal entry on 31 January when the transaction was fully settled.

Question:

Need to identify accounting issues within the following 2 scenarios and how they should be handled:

Scenario 1:

At HLJ's 2017 year-end, the company held an inventory of 300 ounces of gold having a purchase cost of $1,150 U.S. per ounce (which at an exchange rate of $1 Canadian = $0.9388 U.S. resulted in a cost of $1,225 per ounce Canadian). At July 31, 2017, the market value for gold was $1,130 U.S. per ounce (also $1,130 Canadian). As a result, for fiscal 2017 year- end, gold inventory was written down by $28,500.

Currently, gold has increased in value to $1,305 U.S. per ounce ($1,350 Canadian). 200 ounces of the gold in the 2017 inventory will still be held by HLJ at its fiscal 2018 year-end.

Scenario 2:

In August 2017, HLJ initiated a new promotional program called "Engagement Embarrassment Insurance" (EEI) intended for individuals who purchase surprise diamond engagement rings for their prospective partners. If the marriage proposal is not accepted (or for any other reason within three months of purchase), HLJ will repurchase the ring from the customer.

HLJ will refund the original sales price of the diamond portion of the ring (on average $2,000) but will not provide a refund for the gold component of the ring (which averages $1,000) as HLJ considers the ring's band and setting to be custom-made for the customer, whereas each diamond has a grading certificate to ensure its individual features. The average cost of gold is $600, and $1,200 for diamond.

Since beginning the EEI program, the company has had, on average, 60 customers in the potential repurchase period at any point in time. Total number of rings sold under this program in fiscal 2018 is expected to be 240.

Useful information to know: The company has no debt other than accounts payable, the owners take a salary of $150,000 to $200,000 each. The company's pre tax income has, over the last few years been around $250,000. Their year end is July 31. They expect their sales to increase to $6 million in 2018, from last year's $5.4 million. The company uses ASPE, and taxes payable method of accounting.