Finance Answers

An Indian multinational corporation has a subsidiary in the United Kingdom. To meet its investment needs that subsidiary firm wants to raise GBP 10 million by issuing five-year bonds in the British market at a coupon rate of 10percent per annum, payable annually. The current spot rate is GBP/INR 82. The INR is expected to depreciate at 1 percent each year for the next five years what is the effective cost of debt to the Indian MNC? Determine the Net Cash Flows for five years is as follows. 8marks

Year 1 2 3 4 5

57.98 62.75 63.38 64.02 926.93

Briefly explain the difference in assumptions underlying portfolio theory and the capital asset pricing model (CAPM)

a) Financial engineering has been disparaged as nothing more than paper shuffling. Critics argue that resources used for rearranging wealth (i.e, bundling and unbundling financial assets) might be better spent on creating wealth (i.e, real estate)

Evaluate this criticism. (15marks)

a) Consider the following information for company XYZ:

Current dividend = 4n

Dividend 2years ago= 3.3n

Current equity beta=1.6

Equity risk premium=10%

Risk free rate=5%

Calculate the price of a share for this company. [5marks]

Using data from the Economic Report of the President, calculate velocity for the M2 definition of the money supply in the past five years. Does velocity appear to be constant?

Justus Motor Co.has a WACC of 11.50%, and its value of operations is $25.00 million. Justus's free cash flow is expected to grow at a constant rate of 7.00%. What was the last free cash flow, FCF0 in millions?

Discuss the main causes of the financial crisis of 2008? Identify the main risk that contributed to this crisis

On January 1, 2019, Joan Campbell borrows $20,000 from Susan Rone and agrees to repay this amount in payments of $4,000 a year until the debt is paid in full. Payments are to be of an equal amount and are to include interest at 12% on the unpaid balance of principal at the beginning of each period. Assuming that the first payment is to be made on January 1, 2020, determine the number of payments of $4,000 each to be made and the amount of the final payment.

What is the future value on December 31, 2026, of 7 annual cash flows of $10,000 with the first cash payment made on December 31, 2019, and interest at 12% being compounded annually?

On January 1, 2019, Joan Campbell borrows $20,000 from Susan Rone and agrees to repay this amount in payments of $4,000 a year until the debt is paid in full. Payments are to be of an equal amount and are to include interest at 12% on the unpaid balance of principal at the beginning of each period. Assuming that the first payment is to be made on January 1, 2020, determine the number of payments of $4,000 each to be made and the amount of the final payment.

What is the future value on December 31, 2026, of 7 annual cash flows of $10,000 with the first cash payment made on December 31, 2019, and interest at 12% being compounded annually?