Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow -$590,000 0 1 2 3 4 220,000 163,000 228,000 207,000 All cash flows will occur in Erewhon and are expressed in dollars. In an attempt to improve its economy, the Erewhonian 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 7 percent. Assume Anderson uses a required return of 13 percent on this project. a. What is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the IRR of the project? (Do not round intermediate calculations and enter
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- Golden Ltd is an exporting company and it will have receivables in Malaysian ringgit in coming years. It expects the Malaysian ringgit to depreciate against the US dollar over time. It wants to get rid of its transaction exposure by denominating the exports in US dollars but that it is still subject to operating exposure. The long-term hedging techniques are constrained and it does not know how much Malaysian ringgit it will receive in the future, so it is difficult even if a long-term hedging method was available. How can Golden Ltd lessen its exposure in the case?Suppose that Salem Co, a U.S.-based MNC that both purchases supplies from Canada and sells exports in Canada, is seeking to measure the economic exposure of its cash flows. Salem wishes to analyze how its cash flows might change under different exchange rates for the Canadian dollar (the only foreign currency in which it deals). Salem believes that the value of the Canadian dollar will be $0.70, $0.75, or $0.80, and seeks to analyze its cash flows under each of these scenarios. The following table shows Salem’s cash flows under each of these exchange rates. Use the table to answer the question that follows. Exchange Rate Scenario Exchange Rate Scenario Exchange Rate Scenario C$1=$0.70 C$1=$0.75 C$1=$0.80 (Millions) (Millions) (Millions) Sales (1) U.S. Sales $315 $315 $315 (2) Canadian Sales $3.50 $4.00 $4.00 (3) Total Sales in U.S. $ $318.50 $318.75 $319.00 Cost of Materials and Operating Expenses (4)…Etemadi Amalgamated, a U.S. manufacturing firm, is considering a new project in Portugal. You are in Etemadi's corporate finance department and are responsible for deciding whether to undertake the project. The expected free cash flows, in euros, are shown here: Year 1 2 3 Free Cash Flow (E million) 0 -15 1 8.9 9.5 11.7 You know that the spot exchange rate is $0.87/€. In addition, the risk-free interest rate on dollars is 3.9% and the risk-free interest rate on euros is 56%. Assume that these markets are internationally integrated and the uncertainty in the free cash flows is not correlated with uncertainty in the exchange rate. You determine that the dollar WACC for these cash flows is 8.4%. What is the dollar present value of the project? Should Etemadi Amalgamated undertake the project? (Enter all outflows of cash as negative numbers.)
- Riverside Clippers Corp believes that the U.S. dollar may weaken in the coming months against the New Taiwanese Dollar and does not want to face any currency risk. Assume that Riverside Clippers Corp can enter into a forward contract today to purchase 175 NTD for $5.35. Should Riverside Clippers Corp manufacture the 800,000 garden tools in the Maryland facility or purchase them from the Taiwan supplier? Explain.Caribou River. Caribou River, Ltd., a Canadian manufacturer of raincoats, does not selectively hedge its transaction exposure. Instead, if the date of the transaction is known with certainty, all foreign currency-denominated cash flows must utilize the following mandatory forward cover formula: Caribou expects to receive multiple payments in Danish kroner over the next year. Kr3,000,000 is due in 90 days; Kr2,300,000 is due in 180 days; and Kr950,000 is due in one year. Using the following spot and forward exchange rates, what would be the amount of forward cover required by company policy for each period? What would be the Canadian dollar amount of forward cover required by company policy in 3 months? C$ (Round to the nearest cent.) Data table Data table (Click on the following icon in order to copy its contents into a spreadsheet.) (Click on the following icon in order to copy its contents into a spreadsheet.) Spot rate, Kr/C$ 4.61 Mandatory Forward Cover 0-90 days Paying the points…Vogl Co. is a U.S. firm conducting a financial plan for the next year. It has no foreign, subsidiaries, but more than half of it sale are form exports. Its foreign cash inflows to be received from exporting and cash outflow to be paid for imported supplies over the next year are shown n the following table: Currency total inflow total outflow Canadian dollar (C$) C $32,000,000 C $ 2,000,000 New Zealand dollar (NZ$) NZ $ 5,000,000 NZ $1,000,000 Mexican peso (MXP) MXP 11,000,000 MXP 10,000,000 Singapore dollar (s$) S$ 4, 000,000 8000,000 The spot rate and one-year forward rates as of today are shown below: Currency spot rate one-year forward rate C$ $.90 .93 NZ$ .60 .59 MXP .18 .15 S$ .65 .64 Questions 1. Based on the information provided, determine Vogl’s net exposure to each foreign currency in dollars. 2. Assume that today’s spot rate is used as a forecast of the future spot rate one year from now. The New Zealand dollar, Mexican peso, and Singapore dollars are expected to move in…
- Please Do not copy other , answers should be unique. Thank you! The Export-Import Bank of the United States subsidizes the foreign purchase of certain U.S. manufactured goods by offering to finance the foreign purchases at below-market interest rates. For example, suppose a foreign commercial airline agrees to purchase four commercial jet airplanes from Boeing for $400 million. Assume the foreign airline can borrow the $400 million at 6 percent using private financing to be repaid in equal annual payments over 15 years. If the U.S. Export-Import Bank offers to loan the $400 million at 4 percent, to be repaid in equal annual installments over 15 years, what is the present-value-equivalent amount of this subsidy to the foreign airline? Note : Please answer it using the Present capital values of AnnuitySuppose that Kittle Co. is a U.S. based MNC that is considering setting up a subsidiary in Singapore. Kittle would like this subsidiary to produce and sell guitars locally in Singapore, and needs assistance with capital budgeting. The duration of this project is four years, with a salvage value of $12,000,000. This salvage value would be paid by the government in Singapore to Kittle in exchange for ownership of the subsidiary. The expected exchange rate of the Singapore dollar of $0.50 over the life of the project. Kittle managers are worried about the uncertainty of the value of the Singapore dollar. While they expect that the exchange rate will be $0.50, they recognize that this value may fluctuate. Thus, they decide to S$3,000,000 in cash flows per year, while any additional cash flows beyond this threshold would not be hedged. The forward rate that Kittle will use to hedge the S$3,000,000 is $0.48. The following table shows a key subsection of Kittle's capital budgeting analysis…Consider the following international investment opportunity. It involves a gold mine that can be opened at a cost, then produces a positive cash flow, but then requires environmental clean-up. Year 0: -64,000 Euros Year 1: 160,000 Euros Year 2: -100,000 Euros The current exchange rate is $1.60 = 1 Euro. The inflation rate in the U.S. is 6 percent and in the euro zone 2 percent. The appropriate cost of capital to a U.S. -based firm for a domestic project of this risk is 8 percent. Find the dollar cash flows to compute the dollar - denominated NPV of this project. And also find the euro - zone cost of capital.
- Suppose that Kittle Co. is a U.S. based MNC that is considering setting up a subsidiary in Singapore. Kittle would like this subsidiary to produce and sell guitars locally in Singapore, and needs assistance with capital budgeting. The duration of this project is four years, with a salvage value of $12,000,000. This salvage value would be paid by the government in Singapore to Kittle in exchange for ownership of the subsidiary. The expected exchange rate of the Singapore dollar of $0.50 over the life of the project. Kittle managers are worried about the uncertainty of the value of the Singapore dollar. While they expect that the exchange rate will be $0.50, they recognize that this value may fluctuate. Thus, they decide to S$3,000,000 in cash flows per year, while any additional cash flows beyond this threshold would not be hedged. The forward rate that Kittle will use to hedge the S$3,000,000 is $0.48. The following table shows a key subsection of Kittle's capital budgeting analysis…Consider the following international investment opportunity. It involves a gold mine that can be opened at a cost, then produces a positive cash flow, but then requires environmental clean-up. Year 0 + -€64,000 Year 1 Year 2 €160,000 -€100,000 The current exchange rate is $1.60 = €1.00. The inflation rate in the U.S. is 6 percent and in the euro zone 2 percent. The appropriate cost of capital to a U.S.-based firm for a domestic project of this risk is 8 percent. Find the euro-zone cost of capital. Write it down in percent with two decimals places.A U.S.-based MNC has a subsidiary in Malaysia that generates substantial net cash inflows denominated in Ringgit Malaysia. Given this information, the MNC would ____ from a ____ of the Ringgit Malaysia. A. benefit; appreciation B. not benefit; depreciation C. benefit; depreciation D. not benefit; appreciation