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All the Information is base on United State Wk1

Cray Research sold a super computer to the Max Planck Institute in Germany on credit and invoiced €10 million payable in six months. Currently, the six-month forward exchange rate is $1.10/€ and the foreign exchange advisor for Cray Research predicts that the spot rate is likely to be $1.05/€ in six months.

  1. What is the expected gain/loss from the forward hedging?
  2. If you were the financial manager of Cray Research, would you recommend hedging this euro receivable? Why or why not?
  3. Suppose the foreign exchange advisor predicts that the future spot rate will be the same as the forward exchange rate quoted today. Would you recommend hedging in this case? Why or why not?

Wk3

  1. Discuss how the cost of capital is determined in segmented vs. integrated capital markets.
  2. How would you explain the fact that China emerged as one of the most important recipients of foreign direct investment (FDI) in recent years?
  3. Security returns are found to be less correlated across countries than within a country. Why can this be?
  4. As an investor, what factors would you consider before investing in the emerging market stocks of a developing country?


Wk4


  1. Wiley Corporation has an optimal debt ratio of 37percent. Its cost of equity capital is 10.8 percent and its before-tax borrowing rate is 4 percent. Given a marginal tax rate of 40 percent, calculate:

A. the weighted-average cost of capital, and

B. the cost of equity for an equivalent all-equity financed firm.


2.Discuss the pros and cons of a MNC having a centralized cash manager handle all investment and borrowing for all affiliates of the MNC versus each affiliate having a local manager who performs the cash management activities of the affiliate.

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