Problem 31-1 on Exchange Rates based on Chapter 31 International Corporate Finance\t(Excel file included)\tYou are a U.S. investor who is trying to calculate the present value of a \u20ac5 million cash inflow that will occur 1 year in the future. The spot exchange rate is S = $1.25\/\u20ac and the forward rate is F1 = $1.215\/\u20ac.\tYou estimate that the appropriate dollar discount rate for this cash flow is 4% and the appropriate euro discount rate is 7%.\tProblem 31-2 on Currency Appreciation based on Chapter 31 International Corporate Finance\t(Excel file included)\tMia Caruso Enterprises, a U.S. manufacturer of children’s toys, has made a sale in Cyprus and is expecting a C\u00a34 million cash inflow in 1 year. The current spot rate is S = $1.80\/C\u00a3 and the one-year forward rate is F1 = $1.8857\/C\u00a3.\ta. What is the present value of Mia Caruso’s C\u00a34 million inflow computed by first discounting the cash flow at the appropriate Cypriot pound discount rate of 5%, and then converting the result into dollars?\tProblem 31-7 on Eurobonds versus Domestic Bonds based on Chapter 31 International Corporate Finance\tThe dollar cost of debt for Coval Consulting, a U.S. research firm, is 7.5%. The firm faces a tax rate of 30% on all income, no matter where it is earned. Managers in the firm need to know its yen cost of debt because\tthey are considering launching a new bond issue in Tokyo to raise money for a new investment there.\tThe risk-free interest rates on dollars and yen are r$ = 5% and r\u00a5= 1%, respectively. Coval Consulting is willing to assume that capital markets are internationally integrated and\tthat its free cash flows are uncorrelated with the yen-dollar spot rate.\tWhat is Coval Consulting’s after-tax cost of debt in yen? (Hint: Start by finding the after-tax cost of debt in dollars and then find the yen equivalent.)\tProblem 31-12 on Credit & Exchange Rate Risk based on Chapter 31 International Corporate Finance\tSuppose the interest on Russian government bonds is 7.5%, and the current exchange rate is 28 rubles per dollar. If the forward exchange rate is 28.5 rubles per dollar, and the current U.S. risk-free interest rate is 4.5%,\twhat is the implied credit spread for Russian government bonds?\tProblem 30-9 on Forward Market Hedge based on Chapter 30 Risk Management\t(Excel file included)\tYou are a broker for frozen seafood products for Choyce Products. You just signed a deal with a Belgian distributor. Under the terms of the contract, in 1 year, you will deliver 4000 kg of frozen king crab for 100,000 euros.\tYour cost for obtaining the king crab is $110,000. All cash flows occur in exactly 1 year.\ta. Plot your profits in 1 year from the contract as a function of the exchange rate in 1 year for exchange rates from $0.75\/\u20ac to $1.50\/\u20ac. Label this line Unhedged Profits.<\/p>\n","protected":false},"excerpt":{"rendered":"
Problem 31-1 on Exchange Rates based on Chapter 31 International Corporate Finance (Excel file included) You are a U.S. investor who is trying to calculate the present value of a \u20ac5 million cash inflow that will occur 1 year in Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-216810","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/216810","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=216810"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/216810\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=216810"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=216810"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=216810"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}