{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Ch18_SSol

# Ch18_SSol - Problem 18.1 Sarasota Corporation a What is the...

This preview shows pages 1–2. Sign up to view the full content.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Problem 18.1 Sarasota Corporation a. What is the present value of the expected euro dividend stream if the euro is expected to appreciate 4.00% per annum against the dollar? b. What is the present value of the expected dividend stream if the euro were to depreciate 3.00% per annum against the dollar? Assumptions Values Cash dividends to be received (euros) € 720,000 Expected dividend growth rate per year 10.0% Current spot exchange rate (\$/euro) \$1.2500 Sarasota's weighted average cost of capital 12.0% a) PV of dividend stream if euro appreciates 4% 1 2 3 Dividend stream expected from investment, in euros € 720,000 € 792,000 € 871,200 Current and expected spot rate (\$/euro) : spot x ( 1 + .04) 4.0% \$1.2500 \$1.3000 \$1.3520 \$1.4061 Dividends, in US dollars \$936,000 \$1,070,784 \$1,224,977 Present value factor 1.0000 0.8929 0.7972 0.7118 Present value of dividends, in US dollars \$835,714 \$853,622 \$871,914 Cumulative NPV \$2,561,251 b) PV of dividend stream if euro depreciates 3% 1 2 3 Dividend stream expected from investment, in euros € 720,000 € 792,000 € 871,200 Current and expected spot rate (\$/euro) : spot x ( 1 - .03)-3.0% \$1.2500 \$1.2125 \$1.1761 \$1.1408 Dividends, in US dollars \$873,000 \$931,491 \$993,901 Present value factor 1.0000 0.8929 0.7972 0....
View Full Document

{[ snackBarMessage ]}

### Page1 / 2

Ch18_SSol - Problem 18.1 Sarasota Corporation a What is the...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online