ttcyftxycf (111)-4

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School

University of Florida *

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Course

206

Subject

Finance

Date

Nov 24, 2024

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pdf

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1

Uploaded by ChiefOpossum3761

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The principle that there must be an evidentiary basis, such as an invoice or receipt, for most assets and liabilities is also known as the ____________. - ✔✔ Measurement principle Which of the following statements is TRUE of the economic value added (EVA) ratio? - ✔✔ EVA is the after-tax operating income minus a charge for the opportunity cost of long-term debt and equity Company A plans to build a manufacturing plant in Mexico. Since the headquarters of the manufacturing company is based in the U.S. it has better access to borrow at a lower interest rate in the U.S. than abroad. Considering their new Mexican plant is MXN functional, they will face FX exposure. Following their hedging policy, they use a currency swap that will allow them to borrow at a lower interest rate in USD and convert the debt to MXN at the spot rate ($19.80 MXN/USD) mitigating their FX risk. Company A borrows USD $10,000,000 at a fixed rate of 3% for 10 years with semiannual payments in the U.S. and they enter into a currency swap with Company B (a counterparty bank). The swap terms indicate that the notional principal will be exchanged at the beginning of the swap. At the inception of the swap how much will Company A pays Company B and vice versa? - ✔✔ Company A pays $10,000,000 USD to Company B; Company B pays $198,000,000 MXN to Company A Company A pays $10,000,000 USD to Company B; Company B pays $198,000,000 MXN to Company A - ✔✔ 10.88% A company is considering investing $5 million in a plant and equipment. The comparison of the net present value on this investment, relative to alternative investments, would be an application of ___________. - ✔✔ Capital budgeting A $100,000 Treasury bill that matures in 182 days is currently selling at 9%. What is the bond equivalent yield on this security? (Rounded to the nearest hundredth of a percent) - ✔✔ 9.57% A seller of luxury boats that retail for an average of $200,000 offers cash discount terms of 1/10 net 30. The net present value (NPV) of these terms is -$696. Assume an annual opportunity cost of 12%. If the seller adopted 1/20 net 30 terms, what would the NPV be? (Rounded to the nearest whole dollar) Should the seller adopt these terms? - ✔✔ NPV is -$1,340 and the seller should not adopt these terms A consumer has a credit limit of $10,000 on her credit card with available credit of $1,000. She buys something for $900 online and before that charge appears on her credit card, attempts to buy something else for $500. What would occur in this situation? - ✔✔ A hold placed on her credit limit would prevent the second charge
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