Motoguzzie exports large-engine motorcycles (greater than 700cc) to Australia and invoice its customers in U.S. dollars. Sydney Wholesale Imports has purchased $3,000,000 of merchandise from Motoguzzie, with payment due in six months. The payment will be made with a bankers' acceptance issued by Charter Bank of Sydney at a fee of 1.75% per annum. Motoguzzie has a weighted average cost of capital of 10%. If Motoguzzie holds this acceptance to maturity, what is its annualized percentage all-in cost?

BP is one of the largest international companies in the oil & gas industry. The company has transactions denominated in several currencies. Being a British company, the domestic currency used for valuation is the British pound. In 3 months, BP is due to receive a 41.5m ZAR reimbursement from a major subsidiary in South Africa.   You have the following information:   Table 1: Bank’s spot and forward rates (in points)   Bid Ask GBPZAR 19.6971 19.7183 GBPZAR 3M FWD 3104.8000 3139.0000 Table 2: CME Currency Futures   Settlement Contract Units GBPZAR 3M 19.8911 125,000 Table 3: OTC Currency Options   Strike Call (in £) Put (in £) GBPZAR 19.8925 0.031 0.025 The spot exchange rate in 3 months is expected to be either 19.7762 or 20.1556. Calculate the outcome of hedging using forwards.               Calculate the outcome of hedging using futures.   Calculate the outcome of hedging using options.   Recommend a…

ABC Ltd., a company engaged in the manufacturing business, imported its raw material from the U.S.A worth USD 10,000,000. The payment is required to be made in 90 days. The exporter of the raw material has offered an interest- free credit period of 50 days and for the remaining period of 40 days interest of 9% per annum will be charged. The company approached its local bankers who quoted an interest rate of 10% p.a. for a 40-day loan. The exchange rates provided by the bank are as follows: Spot (USD/INR) 80.34 50 days forward (USD/INR) 81.16 90 days forward (USD/INR) 81.79 As a Financial Analyst of the company, you are required to evaluate the following options and provide a conclusion that which alternative is better and by what amount it will save the outflows for the company in INR: Make the payment in 50 days, or Avail the Exporter's offer of 90 days credit period. Note: Use 365 days in a year for the calculations and round off all the values to the nearest rupee. Alternative 1 is…

IBM purchased computer chips from NEC, a Japanese electronics concern, and was billed ¥210 million payable in three months. Currently, the spot USD/JPY rate is 108 and the three-month forward rate is 103. The three-month money market interest rate is 4.6 percent per annum in the U.S. and 2.4 percent per annum in Japan. The management of IBM decided to use the money market hedge to deal with this yen account payable. Calculate today's dollar cost of meeting this yen obligation. (USD, no cents)

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U.S. based retail company, Holmes & Holmes Inc., plans to expand to the European market. To establish an immediate presence in in Europe, the company considers buying Enola Plc, a privately owned company headquartered in the UK. The EBIT (earnings before interest and taxes) for Enola Plc. is expected to reach $17.5 million at the end of next year. The company's EBIT is projected to grow at 8.5% per year for the next five years before reaching a stable long-term growth at 3% indefinitely. The net working capital, capital expenditures, and depreciation as a percentage of EBIT are expected to be 10%, 12.5%, and 9%, respectively. Enola has 2.5 million shares outstanding. Holmes & Holmes has a total debt outstanding of $270 million with a YTM (yield to maturity) of 6%. The company has total market capitalization of $585 million with the required return on equity of 12.5%. Enola Plc. currently has a total debt outstanding of $75 million. The tax rate for both companies is 21%. a. You…

Think back to the International Collections case in Assignment 5.  Assume that the 60-day payment terms that you gave your buyer are typical, and that you will be required to carry up to $2,500,000.00 per month in accounts receivable for export sales.  To be able to produce inventory for additional sales while while you carry 60 days of accounts receivable, you are going to need to find an outside source of additional export working capital.  Discuss in detail two different options for financing export working capital to keep production going while you wait for payment from the last 60 days of sales.

Required: Zeda Incorporated, a U.S. MNC, is considering making a fixed direct investment in Denmark. The Danish government has offered Zeda a concessionary loan of DKK14,600,000 at a rate of 4 percent per annum. The normal borrowing rate is 6 percent in dollars and 5.5 percent in Danish krone. The loan schedule calls for the principal to be repaid in three equal annual installments. What is the present value of the benefit of the concessionary loan? The current spot rate is DKK 5.60 per $1.00 and the expected inflation rate is 3 percent in the United States and 2.5 percent in Denmark. Note: Round the exchange rates to two decimal places. Round the intermediate calculations and final answer to nearest whole number. Present value of the benefit of the concessionary loan

Banana group is one of the largest MNC in the world, with more than 20 years of extensive experience in the exporting of bananas to Central Asia countries with the purpose of selling there. It wants to open a new subsidiary in Almaty which will sell exported bananas to the citizens of Almaty. They are evaluating a project (subsidiary) with the following characteristics: -Fixed capital investment includes the purchase of five refrigerators which cost 92,000 tenge each; two packaging machines 105,165 tenge per unit; two units of some equipment which is 25,000 tenge/unit; one truck 40,000 tenge; a factory of 1,000 meters square and 30,000 tenge per meter square, the factory seller will provide a ten percent discount from the total cost of factory; and some other fixed capital costs amount in 20,000 tenge. -The project has an expected five-year life. -The initial investment in net working capital is 1,500,000 tenge -The fixed capital is depreciated using straight line method -Sales are…

A US multinational corporation has operations in Bolivia through which it plans to sell a new product of 500,000 cans of beans per year for the next 3 years, at a price of BOB 4 per can after incurring a variable cost of BOB 2.50 per can. The company will also incur a fixed cost of BOB 120,000 per year. The company has invested BOB 900,000 today in manufacturing equipment for its Bolivian operations, which will be depreciated at $300,000 annually over its 3-year life. The corporation's required rate of return (WACC) is 20% and has a tax rate of 25%. The spot rate was BOB 6.91/$ before it unexpectedly changed to BOB 7.25/$. What is the value of the Bolivian operations prior to the unexpected change in the spot rate assuming that the operations have a 3-year life only? (round to the nearest dollar) US$237,699 US$107,453 US$159,076 88 US$166,903