Suppose Intel is considering building a new chip-making factory. Would Intel compare the expected rate of return on the factory to the bond market interest rate when deciding whether to build the factory? If Intel needs to borrow money in the bond market, how might the bond interest rate affect Intel's decision whether to build the factory? If Intel has enough of its own funds to finance the new factory without borrowing, would the bond interest rate affect their decision whether to build the factory?

Lluvia Manufacturing and Paraguas Products both seek funding at the lowest possible cost. Lluvia would prefer the flexibility of floating-rate borrowing, while Paraguas wants the security of fixed-rate borrowing. Lluvia is the more creditworthy company. They face the following rate structure. Lluvia, with the better credit rating, has lower borrowing costs in both types of borrowing. Lluvia wants floating-rate debt, so it could borrow at LIBOR+1.000%. However, it could borrow fixed at 8.500% and swap for floating-rate debt. Paraguas wants fixed-rate debt, so it could borrow fixed at 12.500%. However, it could borrow floating at LIBOR+2.000% and swap for fixed-rate debt. What should they do? (LIBOR is 5.500%.)   Lluvia's comparative advantage is % (round 3 decimals)   Paraguas's net interest after a swap with Lluvia is (round 3 decimals)   Lluvia's savings on borrowing versus net swap is (round 3 decimals)   Paraguas's savings on borrowing versus net swap is (round 3 decimals)

Royal Bank of Belgium (RBB) will be worth €100 million or €120 million with equal probability in one year. RBB is highly leveraged and has bonds outstanding promising to pay €90 million next year. RBB is considering a risky project that will payoff €50 million or -€65 million with equal probability. Would RBB’s shareholders want you to engage in the risky project? What is the expected payoff to RBB’s existing shareholders? How would your answers change if the bondholders could convert the bond to 80% of RBB’s equity?

You are International Business Manager at a UK based company. Considering high demand your company plans a full-scale expansion. Your company has identified USA and Europe as potential markets. You are requested to analyse both projects and advise. In considering such large project, you must work out the risk of each project, cost of capital and NPV. Allocate discount rate for each project accordingly and justify why you allocated this rate in your discussion. Discuss how international risks can be managed.   Projected cash flows in respective currencies: Year    Net Cash Flow – USD USA    Net Cash Flow - EUR Europe0    -20 million    -20 million 1    2 million    2 million2    4 million    3 million3    5 million    4 million4    6 million    8 million5    8 million    8 million Instructions:a.    Discuss viability of both projects in today’s global business context and allocate discount rate. b.    How much investment is needed for each project and what is the NPV of each project? c.…