I. Suppose that a company in India initially owns a factory worth 45 million rupees, that it has borrowed 1 million US dollars to finance its construction, and that these are its only assets and liabilities. A) If the exchange rate is initially 40 rupees per dollar, what is the initial value of the company, in rupees? B) If the rupee now depreciates by 20% what does the value of the company in rupees become? C) Would the effect of the depreciation on the value of the company be any different if it was measured in dollars?

I. Suppose that a company in India initially owns a factory worth 45 million rupees, that it has borrowed 1 million US dollars to finance its construction, and that these are its only assets and liabilities. A) If the exchange rate is initially 40 rupees per dollar, what is the initial value of the company, in rupees? B) If the rupee now depreciates by 20% what does the value of the company in rupees become? C) Would the effect of the depreciation on the value of the company be any different if it was measured in dollars?

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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