Suppose that the cost of borrowing restricted euros is 7% annually, whereas the market rate for these funds is 12%. If a firm can borrow €10 million of restricted funds, how much will it save annually in before-tax franc interest expense?
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Suppose that the cost of borrowing restricted euros is
7% annually, whereas the market rate for these funds is
12%. If a firm can borrow €10 million of restricted funds,
how much will it save annually in before-tax franc interest
expense?
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Solved in 2 steps
- The current market rate of interest is 8 percent. At that rate of interest, businesses borrow $500 billion per year for investment and consumers borrow $100 billion per year to finance purchases. The government is currently borrowing $100 billion per year to cover its budget deficit. a. Derive the market demand for loanable funds, and show how investors and consumers will be affected if the budget deficit increases to $200 billion per year. b. Show the impact on the market rate of interest, assuming that taxpayers do not anticipate any future tax increases. c. How would your conclusion differ if taxpayers fully anticipate future tax increases?If the required reserve ratio is 15%, currency in circulation is $400 Billion, checkable deposists are $8000 billion, and excess reserves total is $0.8 billion. first) calculate the M1 money multiplier second) if the monetatyr base now increases by $275 billion, how much would money supply increase by?An investor starts with 1 million and converts them to £694,500, which is then invested for one year. In a year the investor has £736,170 which she then converts back to euros at an exchange rate of 0.68 pounds per euro. What way the annual euro rate of return earned?
- The firm's average accounts receivable balance is P2.5 million, and they are financed by a bank loan at an 11% annual interest rate. The firm is considering setting up a regional lockbox system to speed up collections, and it believes this would reduce receivables by 20%. If the annual cost of the system is P15,000, what pre-tax net annual savings would be realized?P40,000P32,400P29,160P44,000P36,000You are considering the purchase of an investment that would pay you $5,000 per year for Years 1-5, $3,000 per year for Years 6-8, and $2,000 per year for Years 9 and 10. If you require a 14%, and the cash flows occur at the end of each year, what is the modified internal rate of return if the initial outlay is $10,000 and the cash flows are reinvested at the required rate of return? 14% 23% 28% 46%The Real Company has cash needs of P5 million per month. If real needs more cash, it can sell marketable securities, incurring a fee of P300 for each transaction. If real leaves its funds in marketable securities, it expects to earn approximately 0.50% per month on their investment. If real gets a cash infusion of P1 million each time it needs cash, what are the total costs per month associated its cash infusions? If real gets a cash infusion of P1 million each time it needs cash, how many transactions would be associated with its cash investment? If real gets a cash infusion of P1 million each time it needs cash, what are the transactions costs per month associated its cash infusions? how much would be the real's minimum total costs associated with cash infusion? If realgets a cash infusion of P1 million each time it needs cash, how much would be the average cash balance associated with its cash investment? If real gets a cash infusion of P1 million each time it needs cash, what are…
- A proposed project which requires an investment of R10,000 (now) is expected to generate a series of five payments in constant rands. It begins with R6,000 at the end of first year but increasing at the rate of 5% per year thereafter. Assume that the average inflation rate is 4% and the market interest rate is 11% during this inflationary period. What is the equivalent present worth of this investment?The Sandbox's Company has cash needs of P5 million per month. If Sandbox needs more cash, it can sell marketable securities, incurring a fee of P300 for each transaction. If Sandbox leaves its funds in marketable securities, it expects to earn approximately 0.50% per month on their investment. If Sandbox gets a cash infusion of P1 million each time it needs cash, what are the transactions costs per month associated its cash infusions?Assuming a 1-year, money market account investment at 2.282.28 percent (APY), a 1.391.39 percent inflation rate, a 2525 percent marginal tax bracket, and a constant $50 comma 00050,000 balance, calculate the after-tax rate of return, the real rate of return, and the total monetary return. What are the implications of this result for cash management decisions?
- A company is due to receive €2,500,000 two-months from today and wishes to save the funds for three months. Money market interest rate spreads for short-term euro transactions are presented in the table below. Money Market Euro Interest Rate Spreads (%) 1 month 2 months 3 months 4 months 5 months 6 months 0.20 - 0.25 0.28– 0.33 0.35 – 0.40 0.45 – 0.56 0.60 – 0.67 0.75 – 0.83 Assume that the company wishes to undertake a money market hedge to fix the future deposit rate. Explain the character of the company’s interest rate risk exposure and calculate the annualised forward interest rate that it can achieve using the current interest rates. Base calculations on months rather than days.Assuming a 1-year, money market account investment at 5.38 percent (APY), a 3.1% inflation rate, a 35 percent marginal tax bracket, and a constant $30,000 balance, calculate the after-tax rate of return, the realreturn, and the total monetary return. What are the implications of this result for cash management decisions? Assuming a 1-year, money market account investment at 5.38% (APY), a 35% marginal tax bracket, and a constant $30,000 balance the after-tax rate of return is? Assuming a 1-year, money market account investment at 5.38% (APY), a 35% marginal tax bracket, and a constant $30,000 balance the after-tax monetary return is? Given an after-tax return of 3.50% and an inflation rate of 3.1% theafter-tax real return is? Given an after-tax return of 3.50% and an inflation rate of 3.1% the after-tax real monetary return is?The Sandbox's Company has cash needs of P5 million per month. If Sandbox needs more cash, it can sell marketable securities, incurring a fee of P300 for each transaction. If Sandbox leaves its funds in marketable securities, it expects to earn approximately 0.50% per month on their investment. If Sandbox gets a cash infusion of P1 million each time it needs cash, what are the holding costs associated with its cash investment?
