Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Grenouille Properties. Grenouille Properties (U.S.) expects to receive cash dividends from a French joint venture over the coming three years. The first dividend, to be paid one year from
now on December 31, is expected to be €720,000. The dividend is then expected to grow 10.1% per year over the following two years. The current exchange rate is $1.2348 = €1.00.
Grenouille's weighted average cost of capital is 10.5%.
a. What is the present value of the expected euro dividend stream if the euro is expected to appreciate 3.90% per annum against the dollar?
b. What is the present value of the expected dividend stream if the euro were to depreciate 3.20% per annum against the dollar?
a. What is the present value of the expected euro dividend stream if the euro is expected to appreciate 3.90% per annum against the dollar?
Calculate the dividends in U.S. dollars for the next three years below: (Round to the nearest whole number for the dividends and round to four decimal places for the exchange rates.)
Dividend stream expected from investment (€)
Current and expected spot rate ($/€)
Dividends ($)
Year 0
1.2348
€
$
Year 1
Year 2
720,000 €
Year 3
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Transcribed Image Text:Grenouille Properties. Grenouille Properties (U.S.) expects to receive cash dividends from a French joint venture over the coming three years. The first dividend, to be paid one year from now on December 31, is expected to be €720,000. The dividend is then expected to grow 10.1% per year over the following two years. The current exchange rate is $1.2348 = €1.00. Grenouille's weighted average cost of capital is 10.5%. a. What is the present value of the expected euro dividend stream if the euro is expected to appreciate 3.90% per annum against the dollar? b. What is the present value of the expected dividend stream if the euro were to depreciate 3.20% per annum against the dollar? a. What is the present value of the expected euro dividend stream if the euro is expected to appreciate 3.90% per annum against the dollar? Calculate the dividends in U.S. dollars for the next three years below: (Round to the nearest whole number for the dividends and round to four decimal places for the exchange rates.) Dividend stream expected from investment (€) Current and expected spot rate ($/€) Dividends ($) Year 0 1.2348 € $ Year 1 Year 2 720,000 € Year 3
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