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You are evaluating a proposed expansion of an existing subsidiary located in Switzerland. The cost of the expansion would be SF 15 million. The cash flows from the project would be SF 4.3 million per year for the next five years. The dollar required return is 14 percent per year, and the current exchange rate is SF 1.08. The going rate on Eurodollars is 6 percent per year. It is 4 percent per year on Euroswiss. Use the approximate form of interest rate parity in calculating the expected spot rates. |
| a. |
Convert the projected franc flows into dollar flows and calculate the NPV. (Enter your answer in dollars, not in millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| NPV | $ |
| b-1. |
What is the required return on franc flows? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. Do not round intermediate calculations.) |
| Return on franc flows | % |
| b-2. |
What is the NPV of the project in Swiss francs? (Enter your answer in francs, not in millions of francs, e.g., 1,234,567. Round your answer to 2 decimal places, e.g., 32.16. Do not round intermediate calculations.) |
| NPV | SF |
| b-3. |
What is the NPV in dollars if you convert the franc NPV to dollars? (Enter your answer in dollars, not in millions of dollars, e.g., 1,234,567. Round your answer to 2 decimal places, e.g., 32.16. Do not round intermediate calculations.) |
In: Finance
A project has the following cash flows:
Project
Year Cash Flow
0 -$3,000
1 1,000
2 1,000
3 1,357.51
4 1,000
Its cost of capital is 10 percent. What is the project’s payback period?
In: Finance
The cost function of a competitive firm is C = 16Q1/2 + Q2 in the long run after the fix costs are paid. The marker demand curve is estimated as D(P) = 200 – 15P. In the long run. What is the competitive equilibrium output level, competitive equilibrium price, and the number of firms in the market?
In: Economics
Which one of the following is the primary determinant of an investment's cost of capital?
Life of the investment
Amount of the initial cash outlay
The investment’s level of risk
The source of funds used for the investment
The investment's net present value
In: Finance
In a random sample of 40 refrigerators, the mean repair cost was $133.00 and the population standard deviation is $17.20. A 95% confidence interval for the population mean repair cost is left parenthesis 127.67 comma 138.33 right parenthesis.
Change the sample size to n=80. Construct a 95% confidence interval for the population mean repair cost. Which confidence interval is wider? Explain. Construct a 95% confidence interval for the population mean repair cost.
The 95% confidence interval is ( _____, _____ ). (Round to two decimal places as needed.)
In: Finance
A company has an EBIT of $4,520 in perpetuity. The unlevered cost of capital is 15.98%, and there are 25,750 common shares outstanding. The company is considering issuing $9,910 in new bonds at par to add financial leverage. The proceeds of the debt issue will be used to repurchase equity. The YTM of the new debt is 11.06% and the tax rate is 33%. What is the weighted average cost of capital after the restructuring?
In: Finance
In: Finance
How does the focus on the value chain impact managerial cost accounting?
In: Accounting
A company is considering investing in a new project that will cost $6,589,490 and increase net income by 8.18%. This project will be completely funded by issuing new equity shares. Currently, the firm has 2,196,490 common shares outstanding with a market price of $32.91 per share. The current earnings per share are $1.79. What will be the earnings per share if the project is implemented?
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$1.73 |
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$1.77 |
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$1.82 |
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$1.86 |
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$1.91 |
In: Finance
what is the real life application of implicit and explicit cost for airline industry
In: Economics