Assume that interaffiliate cash flows are uncorrelated with one another. Calculate the standard deviation of the portfolio of cash held by the centralized depository for the following affiliate members: Affiliate U.S. Canada Mexico Chile Expected Transaction $100,000 $150,000 $175,000 $200,000 Portfolio standard deviation Standard Deviation $40,000 $ 60,000 $ 25,000 $70,000

Assume that interaffiliate cash flows are uncorrelated with one another. Calculate the standard deviation of the portfolio of cash held by the centralized depository for the following affiliate members: Affiliate U.S. Canada Mexico Chile Expected Transaction $100,000 $150,000 $175,000 $200,000 Portfolio standard deviation Standard Deviation $40,000 $ 60,000 $ 25,000 $70,000

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A U.S. MNC has the equivalent of $1 million cash outflows in each of two highly negatively correlated currencies. During ____ dollar cycles, cash outflows are ____. A. none of these B. weak; somewhat stable C. weak; adversely affected D. weak; favorably affected
ve What is the modified internal rate of return for the following cashflow? CFO ($8,250,000) 19.52% O 26.41% 32.11% O 14.03% CF₁ $4,950,000 i = 9% CF₂ H $4,950,000 CF 3 CF4 ($1,850,000) $4,550,000 CF5 H $2,850,000
13. The IBC Company is considering undertaking an investment that promises to have the following cash flows Period 0 is = -$100 Period 1 is= $150 Period 2 is = $50 Period 3 is = $50 If it waits a year, it can invest in an alternative (that is, mutually exclusive) investment that promises to pay Period 1 Period 2 Period 3 −$150 $250 $50 Assume a time value of money of 0.05. Which investment should the firm undertake? Use the present value method and the internal rate of return approaches. With the IRR approach, use the incremental cash flows.
swered Answer Jensen Aquatics Inc., which manufactures and sells scuba gear worldwide, is considering an investment in either Europe or Great Britain. Consider the following cash flows for each project, assume a 12% wacc, and consider these to be average risk projects for the firm. Answer the questions that follow. Britain Total cash inflows (E) Total cash outflows (6) Additional dollar cash inflows (5) Forecast exchange rate (S/E) Europe Total cash inflows (€) Total cash outflows (0) Additional dollar cash inflows (5) Forecast exchange rate (S/E) euro 4,945 $4,945 $6,420 Year 0 (Today) euro 6,420 0 15,000 0 1.50 0 20,000 0 1.00 Refer to Table 16.1. The NPV for the European investment is estimated at Year 1 8000 1000 500 1.46 12,000 1500 500 0.96 Year 2 8000 1000 500 1.45 12.000 1500 500 0.94 Year 3 8000 1000 500 1.44 12.000 1500 500 0.92
Question 4. IBM is evaluating a project in Eutopia. The project will create the following cash flows: Year $ 0 -1,330,000 1 250,000 2 470,000 3 450,000 4 215,000 5 95,000 All cash flows will occur in Eutopia and are expressed in dollars. In an attempt to improve its economy, the Eutopia’s government has declared that all cash flows created by a foreign company are “blocked” and must be reinvested with the government for one year. The reinvestment rate for these funds is 3.5 percent. If Anderson uses a required return of 12 percent on this project, what are the NPV and IRR of the project? Is the IRR you calculated the MIRR of the project? Why or why not?
Net Present Value Method, Present Value Index, and Analysis First United Bank Inc. is evaluating three capital investment projects using the net present value method. Relevant data related to the projects are summarized as follows: BranchOfficeExpansion ComputerSystemUpgrade ATMKioskExpansion Amount to be invested $863,421 $519,486 $311,214 Annual net cash flows: Year 1 358,000 243,000 165,000 Year 2 333,000 219,000 114,000 Year 3 304,000 194,000 83,000 Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Required: 1. Assuming that the desired rate of return is 6%,…

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