On December 12, 20X5, Dahl Company entered into three forward exchange contracts, each to purchase 100,000 francs in 90 days. The relevant exchange rates are as follows: Spot Rate Forward Rate for March 12, 20X6 December 12, 20X5 $ 0.88 $ 0.90 December 31, 20X5 0.98 0.93 3. Dahl entered into the first forward contract to manage the foreign currency risk from a purchase of inventory in November 20X5, payable in March 20X6. The forward contract is not designated as a hedge. At December 31, 20X5, what amount of foreign currency transaction gain should Dahl include in income from this forward contract?
Q: Stock R has a beta of 2.5, Stock S has a beta of 0.45, the required return on an average stock is…
A: Given,The Beta of Stock R is 2.5The beta of stock S is 0.45Average stock return is 10%Risk free rate…
Q: This year, Stang Fabrications Inc. has EBIT of $9,080,000, depreciation expenses of $800,000,…
A: Free cash flow means the amount of cash available with a firm after meeting its operating expenses…
Q: You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of…
A: The company's total worth today is equivalent to the total of the cash flows along with the terminal…
Q: An airline is considering a project of replacement and upgrading of machinery that would improve…
A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…
Q: A 2-year swap based on LIBOR is entered into on 30/6/2010 with current spot 3 month LIBOR at 0.54%.…
A: In an interest rate swap, one party agrees to pay a fixed interest rate on a notional principal…
Q: You are long 10 gold futures contracts, established at an initial settle price of $1,580 per ounce,…
A: Profit= Number of contracts Ounces per contract (Closing Price - Opening Price)
Q: big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping…
A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…
Q: Analyse the consequences of financial management and failure to adhere to regulations, including…
A: Financial management is a critical aspect of running any business or organization, and failing to…
Q: Suppose that Calloway golf would like to capitalize on Phil Michelson winning the Open Championship…
A: NPV is also known as Net Present Value. It is a capital budgeting technique which helps in decision…
Q: Your company is contemplating replacing their current fleet of delivery vehicles with Nissan NV…
A: The free cash flow from the investment can be defined as the amount that will be found by adding the…
Q: Hook Industries's capital structure consists solely of debt and common equity. It can issue debt at…
A: Cost of Equity (Ke) = whereD0 = Recent dividend paid per share =#3.50g = constant growth rate = 7%…
Q: For the following ordinary annuity, determine the size of the periodic payment. Present Future Value…
A: Future value is an estimate of future cash flows that may be received at a future date, discounted…
Q: A bond with par value $1000 pays an annual coupon of $39. What is its coupon rate? Enter your answer…
A: Solution:Coupon payments are the periodic payments made by the issuing firm to the bond…
Q: BATA plc. is considering the following two projects. Only one of which maybe selected. Each project…
A: Making decisions about capital budgeting entails assessing and choosing capital expenditures or…
Q: Quinoa Farms just paid a dividend of $3.50 on its stock. The growth rate in dividends is expected to…
A: Variables in the question:D0=$3.50g= 5% per year (indefinitely)Required return:For the first 3…
Q: Assuming no holidays, a purchaser of stock on Monday is the holder of record on: a. Monday b.…
A: In this question, we are required to determine the day on which purchaser becomes holder of record.
Q: The net price of an item after trade discounts of 34.00%, 11.50%, and 5.50% is $1,700.00. a.…
A: Net price after discount = $1700Trade discount = 34%, 11.50%, 5.50%
Q: Assuming annual payments, what is the value of the bond? Assume face value is $1,000. (Round answer…
A: Bond valuation entails determining the present value of a bond's future cash flows, which include…
Q: You bought one of Great White Shark Repellant Company's 8.4 percent coupon bonds one year ago for…
A: Here,ParticularsValuesFace value of the bond (FV) $ 1,000.00Price of the bond one year ago $…
Q: Fox River LLC owns a 160 - unit multifamily apartment complex in Charlotte, NC. The value allocated…
A: ParticularsaAnnual Depreciation$ 669090.90bNumber of years useful life (United States)27.50c =…
Q: The following table shows your stock positions at the beginning of the year, the dividends that eac…
A: CompanySharesBeginning of year priceDividend per shareEnd of the year priceJohnson…
Q: a. It is considering two hedging alternatives: sell the euro proceeds from the sale forward or…
A: A. The information provided, Boeing can consider any of two hedging alternatives: a forward hedge or…
Q: Black-Scholes Model Use the Black-Scholes model to find the price for a call option with the…
A: The call option refers to the derivative instrument that provides the holder of the instrument with…
Q: Problem 13-6 Calculating Rate of Return [LO13-2] Assume that at the beginning of the year, you…
A: The rate of Return place and important role in the decision making as the investor ability to take…
Q: Calculate Operating Cash Flow (OCF) for the company using the following information. Note the…
A: Operating Cash FlowThe ability of a business enterprise to generate income from its core operations…
Q: A 50-day maturity money market security has a bond equivalent yield of 3.60 percent. The security's…
A: Number of Days = n = 50Bond Equivalent Yield = r = 3.60%
Q: After the last financial crisis, a company is obligated to make additional quarterly payments to an…
A: "As you have asked questions with subparts more than 3; According to honoring guidelines answers for…
Q: Igor owns a rental house and had to paint the living room, kitchen and bathroom after the most…
A: The objective of the question is to determine the amount of expense Igor can deduct for the cost of…
Q: Maria has a portfolio consisting of 7 shares of stock A (purchased for $70 per share) and 4 shares…
A: Variance and standard deviations are the measure of risk. If the value for each is higher then it…
Q: You plan to invest in Fixed income so you have decided that Corporate Bonds are appropriate for your…
A: The callable price would be the amount of one-year coupon plus the par value. In this case, the…
Q: Uber Ride-hailing You are a business analyst consulting for Uber, a global ride-hailing company. It…
A: “Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…
Q: es Consider a project to supply Detroit with 28,000 tons of machine screws annually for automobile…
A: A financial term called net present value (NPV) is used to assess how profitable a project or…
Q: QUESTION ONE Jay has just graduated from Mulungushi University. He plans to work for five years and…
A: Yearly savings for first three years: K35,000Yearly savings for the next two years:…
Q: You have determined in your mind that you would like to have a business of your own, although your…
A: Working Note#1Calculation of capital expenditure:Capital expenditure=Cost of improvement of…
Q: If $27,800 is invested in an account that earns interest at an annual rate of 2.8%, compounded…
A: We need to use future value continuous compounding formula below to calculate number of years.A =…
Q: 6. Individual Problems 17-6 The HR department is trying to fill a vacant position for a job with a…
A: Probability of good fit=0.15Probability of bad fit=0.85cost of hiring a good fit=$0cost of hiring a…
Q: Explain why there is a difference between the present value of the Strayer lottery jackpot and the…
A: The difference between the present value of the Strayer lottery jackpot and the future value of the…
Q: applies to the questions displayed below] Duval Company issues four-year bonds with a $103,000 par…
A: Discount on bonds payable = Face value of bonds - Proceed receivedDiscount Amortization = Discount…
Q: FITCO is considering the purchase of new equipment. The equipment costs $326000, and an additional…
A: Net Present Value (NPV) is a financial measure that calculates the present value of future cash…
Q: Sparkling Water, Incorporated, expects to sell 3.7 million bottles of drinking water each year in…
A: Sales Quantity = 3.7 millionSale price = $1.46Cost = $0.82Revenue growth rate = 1.7%Cost growth rate…
Q: Perform all calculations with excel: ABC Corporation is currently trading at $40, with volatility\…
A: A call option refers to a derivative instrument that provides the holder with the choice of…
Q: Examine the following book-value balance sheet for University Products Incorporated. The preferred…
A: Market Price per Preferred Stock = mpp = $15Dividend per Preferred Stock = dp = $3Market Price per…
Q: CURRENT ASSETS INVESTMENT POLICY Rentz Corporation is investigating the optimal level of current…
A: Return on equity:Return on equity (ROE) is a financial term used to assess how well a business makes…
Q: The Galactic Empire is considering building a new Death Star. The Empire estimates the building…
A: Initial Expense = $1,000,000Shipping & Installation cost = $75,000It will be capitalized and the…
Q: A) The executives of a company close to bankruptcy invest in a very risky project in order to try to…
A: Risk is the unpredictability or uncertainty around the possible results of an investment and it…
Q: Dollar Tree Inc (DLTR) is expected to pay a $1.85 dividend, and it is expected to grow at 9.85% for…
A: Stock price under dividend discount model will be the present value of all dividends and present…
Q: McPherson Pharmaceutical has common stock that is trading for $75 per share. The company paid a…
A: Current Price of Stock = p = $75Current Dividend = d0 = $5.25Growth Rate = g = 3%
Q: a) Identify the cash flows, their timing and the required rate of return applicable to calculating…
A: Net Present Value (NPV) is a financial concept widely used in investment analysis and capital…
Q: Graduation is 4 years away and you want to have $900 available for a trip. If your bank is offering…
A: Future value of account earning simple interest is calculated as follows:-FV = A+IwhereFV =future…
Q: Bhekisizwe (Pty) Ltd, a micro business, registered its business at the commencement of the 2023 year…
A: We are given the following information -Business started in : 2023 year of assessmentCash turnover…
[The following information applies to the questions displayed below.]
Select the correct answer for each of the following questions.
Note: Items 3 through 5 are based on the following:
On December 12, 20X5, Dahl Company entered into three forward exchange contracts, each to purchase 100,000 francs in 90 days. The relevant exchange rates are as follows:
Spot Rate | Forward Rate for March 12, 20X6 | |
---|---|---|
December 12, 20X5 | $ 0.88 | $ 0.90 |
December 31, 20X5 | 0.98 | 0.93 |
3. Dahl entered into the first forward contract to manage the foreign currency risk from a purchase of inventory in November 20X5, payable in March 20X6. The forward contract is not designated as a hedge. At December 31, 20X5, what amount of foreign currency transaction gain should Dahl include in income from this forward contract?
multiple choice-
$10,000
-
$0
-
$5,000
-
$3,000
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
- [The following information applies to the questions displayed below.] Select the correct answer for each of the following questions. Note: Items 3 through 5 are based on the following: On December 12, 20X5, Dahl Company entered into three forward exchange contracts, each to purchase 100,000 francs in 90 days. The relevant exchange rates are as follows: Spot Rate Forward Rate for March 12, 20X6 December 12, 20X5 $ 0.88 $ 0.90 December 31, 20X5 0.98 0.93 2. On September 1, 20X5, Johnson Incorporated entered into a foreign exchange contract for speculative purposes by purchasing €50,000 for delivery in 60 days. The rates to exchange U.S. dollars for euros follow: 9/1/X5 9/30/X5 Spot rates $ 0.75 $ 0.70 30-day forward rate 0.73 0.72 60-day forward rate 0.74 0.73 In its September 30, 20X5, income statement, what amount should Johnson report as foreign exchange loss? multiple choice $2,500 $500 $1,500 $1,000On December 12, 20X5, Dahl Company entered into three forward exchange contracts, each to purchase 100,000 francs in 90 days. The relevant exchange rates are as follows: Spot Rate Forward Rate for March 12, 20X6 December 12, 20X5 $ 0.88 $ 0.90 December 31, 20X5 0.98 0.93 1. The following information applies to Denton Incorporated’s sale of 10,000 foreign currency units under a forward contract dated November 1, 20X5, for delivery on January 31, 20X6: 11/1/X5 12/31/X5 Spot rates $ 0.80 $ 0.83 30-day forward rate 0.79 0.82 90-day forward rate 0.78 0.81 1. Denton entered into the forward contract to speculate in the foreign currency. In its income statement for the year ended December 31, 20X5, what amount of loss should Denton report from this forward contract? multiple choice $400 $300 $200 $0 2. On September 1, 20X5, Johnson Incorporated entered into a foreign exchange contract for speculative purposes by purchasing €50,000 for…On December 12, 20X5, Dahl Company entered into three forward exchange contracts, each to purchase 100,000 francs in 90 days. The relevant exchange rates are as follows: Spot Rate Forward Rate for March 12, 20X6 December 12, 20X5 $ 0.88 $ 0.90 December 31, 20X5 0.98 0.93 3. Dahl entered into the first forward contract to manage the foreign currency risk from a purchase of inventory in November 20X5, payable in March 20X6. The forward contract is not designated as a hedge. At December 31, 20X5, what amount of foreign currency transaction gain should Dahl include in income from this forward contract? multiple choice $10,000 $0 $5,000 $3,000 4. Dahl entered into the second forward contract to hedge a commitment to purchase equipment being manufactured to Dahl’s specifications. At December 31, 20X5, what amount of foreign currency transaction gain should Dahl include in income from this forward contract? multiple choice $10,000 $0 $5,000…
- On December 12, year 11, Imp Co. entered into three forward exchange contracts, each to purchase 100,000 LCU's in 90 days. The relevant exchange rates are as follows:Spot rate Forward rate(for March 12, year 12)December 12, year 11 $0.88 $0.90December 31, year 11 $0.98 $0.93Imp entered into the second forward contract to hedge a commitment to purchase equipment being manufactured to Imp specifications. At December 31, 2022, what amount of foreign currency transaction gain should Imp include in income from this forward contract?a. $0b. $3,000c. $5,000d. $10,000On May 1, 20X1, Aero Electric Corporation, a U.S. company, purchased goods from Neon Circuit Corporation, a British company, on account for £55,000. Aero Electric entered into a 180-day forward exchange contract to offset its exposed foreign currency liability. On the purchase date, the spot rate was $1.57 per British pound and the forward exchange rate was $1.62 per pound. Which of the following are true of the journal entry recorded for the forward contract on Aero Electric's books? (Select all that apply) Group of answer choices Debit Foreign Currency Receivable from Exchange Broker (£) for $89,100. Credit Dollars Payable to Exchange Broker ($) for $86,350. Credit Dollars Payable to Exchange Broker ($) for $89,100. Debit Foreign Currency Receivable from Exchange Broker (£) for $86,350.On December 1, Y1, AAA, a US based company, entered into a three months forward contract to purchase 1 million foreign currency FC, on March 1, Y2. The following US per FC exchange rates apply: Date Spot Rate Forward Rate December 1, Y1 $0.088 $0.084 December 31, Y1 $ 0.080 $0.074 March 1, Y2 $0.076 AAA borrowing rate is 12%. The present value factor for 2 months at an annual rate is 0.9803. How would AAA report the forward contract on its balance sheet on December 31, Y1? Justify your answer and show your calculations. 3 pts As a liability of 9,803. 1,000,000 x (0.084-0.074) = 10,000 x 0.9803 = 9803
- Tara Corporation issued a promissory note denominated in foreign currency for the purchase made from a supplierin England on December 1, for a 60-day, 12% promissory note for 100,000 pounds, at a selling rate of 1FC to P65.50. OnDecember 31, the selling spot rate is 1FC to P64.80. On January 30, the selling spot rate is 1FC to P65.45On the settlement date, how much is the foreign exchange loss?On November 1, 20X6, Smith Imports Incorporated contracted to purchase teacups from England for £50,000. The teacups were to be delivered on January 30, 20X7, with payment due on March 1, 20X7. On November 1, 20X6, Smith entered into a 120-day forward contract to receive 50,000 pounds at a forward rate of £1 = $1.55. The forward contract was acquired to hedge the financial component of the foreign currency commitment. Additional Information for the Exchange Rate Assume the company uses the forward rate in measuring the forward exchange contract and for measuring hedge effectiveness. Spot and exchange rates follow: Date Spot Rate Forward Rate for March 1, 20X7 November 1, 20X6 £1 = $1.60 £1 = $ 1.55 December 31, 20X6 £1 = 1.63 £1 = 1.60 January 30, 20X7 £1 = 1.55 £1 = 1.56 March 1, 20X7 £1 = 1.545 Required: b. Prepare all journal entries from November 1, 20X6, through March 1, 20X7, for the purchase of the teacups, the forward exchange contract, and the foreign…On March 1, 20x1, ABC Co. sold inventory to a foreign company for FC 1,000,000 (FC means foreign currency) when the spot exchange rate is FC 40: ₱1. The payment is due on April 1, 20x1. ABC Co. is concerned about the possible fluctuation in exchange rates, so on this date, ABC Co. entered into a forward contract to sell FC 1,000,000 for ₱25,000 to a broker. According to the terms of the forward contract, if FC 1,000,000 is worth less than ₱25,000 on April 1, 20x1, ABC Co. shall receive from the broker the difference; if it is worth more than ₱25,000, ABC Co. shall pay the broker the difference. If the exchange rate on April 1, 20x1 is FC35: ₱1, how much is the net cash settlement? 3,571 receipt 3,571 payment 4,231 receipt 4,231 payment If the exchange rate on April 1, 20x1 is FC50: ₱1, how much is the net cash settlement? 5,000 payment 5,000 receipt 6,223 payment 6,223 receipt If the exchange rate on March 31, 20x1 is FC45: ₱1, how much is the fair value of the…
- On 12 August, a Commonwealth Bank dealer in Melbourne concluded a transaction with a Citibank dealer in New York. The former agreed to buy from the latter USD5,000,000 at an exchange rate (AUD/USD) of 0.50 for delivery on 14 August. On the delivery date, the exchange rate rose to 1.83. How much would the Commonwealth Bank be required to pay to settle the transaction?The Wall Street Journal reported the following spot and forward rates for the Swiss franc ($/SF): Spot $0.820230-day forward $0.824490-day forward $0.8295180-day forward $0.8343Was the Swiss franc selling at a discount or premium in the forward market? What was the 30-day forward premium (or discount)? What was the 90-day forward premium (or discount)? Suppose you executed a 90-day forward contract to exchange 100,000 Swiss francs into U.S. dollars. How many dollars would you get 90 days hence? Assume a Swiss bank entered into a 180-day forward contract with Bankers Trust to buy $100,000. How many francs will the Swiss bank deliver in six months to get the U.S. dollars?A merchant in the UK has agreed to sell goods to an importer in the USA at an invoice price of $130,000. Of this amount, $40,000 will be payable on shipment, $60,000 one month after shipmentand $30,000 three months after shipment.The quoted foreign exchange rates ($ per £) at the date of shipment are as follows:Spot rate (on shipment) 1.690 -1.692Forward rate-(one month after) 1.687 -1.690Forward rate-(three months after) 1.680 -1.684The merchant decides to enter forward exchange contracts through his bank to hedge these transactions for fear that the future spot rates may change to his disadvantage. i. State what are the presumed advantages of using forward exchange contracts. ii. Calculate the sterling amount that the merchant would receive on these contracts. iii. Comment on the wisdom of the merchant decision to hedge by comparing his total receipts inpound sterling, assuming the spot rate ($ per £) at the dates of receipt of first payment upon shipment remains the same but rates…