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Case Finance Essay

Decent Essays

Case Questions for MGM 828, Fall 2012 Case 1: The Euro in Crisis a) Evaluate the European Central Bank’s (ECB) response to the financial crisis of 2008-2010. What was their analysis of the problem? b) The ECB responded less aggressively than the US Federal Reserve to the crisis. Why? c) In May 2010, should the ECB agree to purchase Greek sovereign debt? Case 2: Foreign Ownership of US Treasury Securities a) Why is foreign ownership of US Treasury securities rising? It is more interesting for foreigners to buy US debt to hedge their holdings. - Accumulating budget deficit (mandatory public spending, military spending) huge military spending due to wars in Iraq and Afghanistan. 9/11 and war on terrorism. Foreign investors …show more content…

In this scenario, predict the direction of change in the US real interest rate and the real value of the US dollar. d) Consider the stylized fact that developed economies have aging populations while most emerging economies have populations that are much younger. Would demographics affect production, savings, and consumption, which in turn affect international flows of goods and capital? Case 3: East Cameron Partners: The Sukuk Bond a) What are the financing alternatives open to East Cameron? What are some of the pros and cons of these alternatives with respect to East Cameron’s goals? b) How does the structure of the Sukuk bond differ from the alternatives being proposed by hedge funds and private equity? Why would this structure be of interest to investors? Why would it be of interest to East Cameron? c) Would you classify the Sukuk as debt or equity? Would it matter? Case 4: Globalizing the Cost of Capital and Capital Budgeting at AES a) How would you evaluate the capital budgeting method used historically by AES? What’s good and bad about it? b) If Venerus implements the suggested methodology, what would be the range of discount rates that AES would use around the world? Does this make sense as a way to do capital budgeting? c) What is the value of the Pakistan project using the cost of capital derived from the new methodology?

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