EBK CORPORATE FINANCE
4th Edition
ISBN: 8220103164535
Author: DeMarzo
Publisher: PEARSON
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Textbook Question
Chapter 31, Problem 2P
Mia Caruso Enterprises, a U.S. manufacturer of children's toys, has made a sale in Bulgaria and is expecting a BGN4 million
- a. What is the
present value of Mia Caruso’s BGN4 million inflow computed by first discounting the cash flow at the appropriate Bulgarian Lev discount rate of 5%, and then converting the result into dollars? - b. What is the present value of Mia Caruso’s BGN4 million inflow computed by first converting the cash flow into dollars, and then discounting at the appropriate dollar discount rate of 10%?
- c. What can you conclude about whether these markets are internationally integrated, based on your answers to parts a and b?
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Students have asked these similar questions
XYZ Corporation, located in the United States,
has an accounts payable obligation of ¥1500
million payable in six months to a bank in
Tokyo. The current spot rate is ¥116/$1.00 and
the six month forward rate is ¥109/$1.00. The
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XYZ Corporation, located in the United States, has an accounts payable obligation of ¥2250 million payable in six
months to a bank in Tokyo. The current spot rate is ¥116/$1.00 and the six month forward rate is ¥109/$1.00. The
annual interest rate is 3 percent in Japan and 6 percent in the United States.
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a.
19582168.89
b. None of the above
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6527389.63
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13054779.26
Newstar Co. expects to pay 500,000 euro in one year. Assume the annual interest rate of borrowing or lending euro is 1% and the annual interest rate of borrowing or lending U.S. dollar is 2%. The spot rate of euro is $1.12 per euro. How much guaranteed amount of U.S. dollar does the company expect to pay after hedging the euro payable transaction in the international money market? (pick the closest answer)
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565,545 USD.
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D.
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Chapter 31 Solutions
EBK CORPORATE FINANCE
Ch. 31.1 - Prob. 1CCCh. 31.1 - What implication do internationally integrated...Ch. 31.2 - Prob. 1CCCh. 31.2 - When do these two methods give the same NPV of the...Ch. 31.3 - Prob. 1CCCh. 31.3 - Prob. 2CCCh. 31.4 - Prob. 1CCCh. 31.4 - Prob. 2CCCh. 31.5 - What conditions cause the cash flows of a foreign...Ch. 31.5 - Prob. 2CC
Ch. 31 - You are a U.S. investor who is trying to calculate...Ch. 31 - Mia Caruso Enterprises, a U.S. manufacturer of...Ch. 31 - Etemadi Amalgamated, a U.S. manufacturing firm, is...Ch. 31 - Prob. 4PCh. 31 - You work for a U.S. firm, and your boss has asked...Ch. 31 - Prob. 6PCh. 31 - Prob. 7PCh. 31 - Prob. 8PCh. 31 - Prob. 9PCh. 31 - Prob. 10PCh. 31 - Prob. 11PCh. 31 - Prob. 12PCh. 31 - Assume that in the original Ityesi example in...
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