
Real Estate Finance And Investments
6th Edition
ISBN: 9781259919688
Author: BRUEGGEMAN, William B., Fisher, Jeffrey D.
Publisher: Mcgraw-hill Education,
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Chapter 4, Problem 14Q
Summary Introduction
To discuss: Meaning of the partial amortization.
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Omni Advisors, an international pension fund manager, uses the concepts of purchasing power parity (PPP) and the International Fisher Effect (IFE) to forecast spot exchange rates. Omni gathers the financial information as follows: Base price level 100 Current U.S. price level 105 Current South African price level 111 Base rand spot exchange rate $ 0.188 Current rand spot exchange rate $ 0.171 Expected annual U.S. inflation 7% Expected annual South African inflation 5% Expected U.S. one-year interest rate 10% Expected South African one-year interest rate 8% Required:
a. The current ZAR spot rate in USD that would have been forecast by PPP.Note: Do not round intermediate calculations. Round your answer to 4 decimal places.
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Delta Company, a U.S. MNC, is contemplating making a foreign capital expenditure in South Africa. The initial cost of the project is ZAR11,000. The annual cash flows over the five-year economic life of the project in ZAR are estimated to be 3,300, 4,300, 5,290, 6,280, and 7,250. The parent firm's cost of capital in dollars is 9,5 percent. Long-run inflation is forecasted to be 3 percent per annum
in the United States and 7 percent in South Africa. The current spot foreign exchange rate is ZAR per USD = 3.75.
Required:.
Calculating the NPV in ZAR using the ZAR equivalent cost of capital according to the Fisher effect and then converting to USD at the current spot rate. - NPV in USD using fisher effect
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Are the two USD NPs different or the same?
What is the NPV in dollars if the actual pattern of ZAR per…
Chapter 4 Solutions
Real Estate Finance And Investments
Ch. 4.A - Prob. 1QCh. 4.A - Prob. 2QCh. 4.A - Prob. 1PCh. 4 - Prob. 1QCh. 4 - Prob. 2QCh. 4 - Prob. 3QCh. 4 - Prob. 4QCh. 4 - Prob. 5QCh. 4 - Prob. 6QCh. 4 - Prob. 7Q
Ch. 4 - Prob. 8QCh. 4 - Prob. 9QCh. 4 - Prob. 10QCh. 4 - Prob. 11QCh. 4 - Prob. 12QCh. 4 - Prob. 13QCh. 4 - Prob. 14QCh. 4 - Prob. 1PCh. 4 - Prob. 2PCh. 4 - Prob. 3PCh. 4 - Prob. 4PCh. 4 - Prob. 5PCh. 4 - Prob. 6PCh. 4 - Prob. 7PCh. 4 - Prob. 8PCh. 4 - Prob. 9PCh. 4 - Prob. 10PCh. 4 - Prob. 11PCh. 4 - Prob. 12PCh. 4 - Prob. 13PCh. 4 - Prob. 15PCh. 4 - Prob. 16PCh. 4 - Prob. 18PCh. 4 - Prob. 19PCh. 4 - Prob. 20P
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