Why do firms hedge their risk and what determines the choice of contract for hedging?

Q: Beale Manufacturing Company has a beta of 1.5, and Foley Industries has a beta of 0.30. The required…

A: Calculation of required return: = Risk free rate + Beta (Market rate - Risk free rate)

Q: Discuss the efficiency of capital markets and focus specifically on the stock market. Describe your…

A: A financial sector is a place where buyers and sellers trade financial securities including such…

Q: Please only solve part C A manager buys three shares of stock today, and then sells one of those…

A: Dollar weighted average return=IRR=? Since  Cash flow for year 0=-3×130=390(CF0) Cash flow for year…

Q: A black box has a total of 10 balls sitting inside. One ball is labeled $100. Two balls are labeled…

A: Given: Label of ball 100 200 300

Q: The King Carpet Company has $2,910,000 in cash and a total of $12,780,000 in current assets. The​…

A: The plan to reduce cash would have impact on both current assets and current liabilities which would…

Q: A 5-year project will require an investment of $100 million. This comprises of plant and machinery…

A: NPV is the difference between present value of cash inflows and initial investment NPV =PV of all…

Q: Ordinary Annuity: James wants to accumulate 124,700 in 7 years. Equal deposits are made at the end…

A: We need to use future value of annuity formula to calculate size of quarterly payment. PMT…

Q: in 8 years (a) What amount should he deposit at the end of each quarter at 6% compounded quarterly…

A: We need to use PMT formula to calculate quarterly payment. PMT =FV*i(1+i)n-1 where FV =future value…

Q: Which of the following statements is false?   A.   Banks have high levels of liquidity assets and…

A: Duration of bond measures the sensitivity of prices of bonds with change in interest rate in the…

Q: A 15-year, $500,000 loan will be repaid by the sinking fund method. Interest only must be paid at…

A: A sinking fund increases a company's creditworthiness, it allows a small corporation to offer a…

Q: 34. The annual income from the mine is P100,000 and the life of the mine is 25 year: Find the price…

A: The price that he is willing to pay is the present value of the annual income that he can derive…

Q: Why was the salvage value used in calculating the depreciation expense?

A: This method also called diminishing balance method or declining balance method where the…

Q: a. lane borrows $30,000 for 10 years. She wishes to pay it off with five payments. The first payment…

A: The concept of the time value of money states that the same amount of money is worth more today than…

Q: new school building was recently built in the area. The entire cost of the project was…

A: We will first have to determine the amount of annual payments towards the loan. The loan is an…

Q: D4 The company is planning to borrow now $85000 at 10% per year. The company expects to repay the…

A: The annual payment can be found using excel’s PMT function. It is the minimum payment that an…

Q: 2. The following table presents the logarithmic returns of stocks A,B and C over three years: Month…

A: “Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…

Q: (A/F,15% monthly,3years) has a value equals to

A: (A/F,15% monthly, 3years) denotes sinking fund deposit factor i = 15% per annum = 1.25% per month n…

Q: Cross-Ocean Boats Ltd. is in the 30% tax bracket. It is interested in determining the minimum return…

A: Given: Risk free rate = 4% Market risk premium = 6% Beta = 1.20 Market price = $55

Q: -year annuity pays $940 per month at the end of each month. For the first seven years, the nominal…

A: The more is compounding the more is the effective interest rate and more is the future value of…

Q: Jim has an annual income of $240,000. Jim is looking to buy a house with monthly property taxes of…

A: Present Value: It is  the current value of a future  stream of money  at a  specified rate of…

Q: In the transit business, a rule of thumb suggests that for every 1% rise in fares, ridership will…

A: Current Ridership = 3500 Current Fare = 7 1% rise in fares will reduce ridership by 0.20% Update…

Q: How important are assumptions in preparing a business project feasibility? Justify your answer. What…

A: A development plan, sometimes referred as a feasible analysis or sustainability report, is a method…

Q: Student Fasked money amounting to P 9,000 from his parents on the first month 2020 and 12,000 on…

A: Here, Amount taken from parents in the first month of 2020 = P9,000 Amount taken from parents in the…

Q: The profitability index of a certain project is 1.2 with an investment of P 56,600. Cost of capital…

A: Payback period is one of the types of capital budgeting technique. It is used to find the minimum…

Q: ​(Liquidity analysis) Airspot​ Motors, Inc. has $2,172,500 in current assets and $869,000 in…

A: The current ratio of a firm is calculated as ratio of current assets and current liabilities. When…

Q: You have been managing a $5 million portfolio that has a beta of 1.25 and a required rate of return…

A: According to capital asset pricing model(CAPM), Expected ( required) return = Risk free rate + Beta…

Q: 10% coupon rate,

A: WACC stands for a weighted average cost of capital means the cost associated with the total capital…

Q: 9.1 Calculating Operating Cash Flow Mater Pasta, Inc., has projected a sales volume of $1,432 for…

A: Operating cash flow is calculated as cash flow generated from business after taxes

Q: An entrepreneur needs thousand of dollars to launch the global expansion of his software business. I…

A: Interest rate compounded continiously is 15% First Annual payments is of $20,000 after that reduced…

Q: When firms enter into loan agreements with their​ bank, it is very common for the agreement to have…

A: a) Current Ratio = Current Assets/Current Liabilities  = 1,907,570,000/ 1,362,550,000 = 1.40

Q: A key feature of Kaizen is that improvements are achieved by making

A: Given statement is Features of kalzen is improvements  by making.

Q: A project is estimated to cost P120T, last 8 years & have a salvage value of P20T. The annual gross…

A: Here, Initial investment = P 120,000 Time period = 8 years Salvage value = P 20,000 Annual income =…

Q: A contractor imported a bulldozer for his job, paying Ph 250000 to the manufacturer. Freight and…

A: Depreciation is an accounting term for a method of allocating a tangible or physical asset's cost…

Q: ieff= ? PoTotal = ? A/POTotal = ?

A: Effective annual rate (EAR) refers to a real interest rate which an investor is expect from his…

Q: Instruction: Show complete solution including the cash flow diagram if not given, Formula function,…

A: Given, Units = 125000 Sunk cost for Design A = $5000 Sunk cost for Design B = $9000

Q: 2. An amount of $800 is invested at the end of each month for 12 months into an account that pays 3%…

A: The future value of annuity function can be used to solve for the value

Q: A 5-year project will require an investment of $100 million. This comprises of plant and machinery…

A: The cost of debt is the average return that the company pays for its debt.

Q: opportunity cost? Depreciation Given the choice, would a firm prefer to use MACRS depreciation or…

A: Depriciation:- Depreciation is an accounting method that is used to divide or allocate Cost of a…

Q: Consider the two mutually exclusive investment projects given in the table below for which MARR =…

A: Project A's initial cost is less than Project B's initial cost. As a result, consider A to be the…

Q: 2. Suppose the Investment Yield on a 182-day T bill is 4%. What is its discount-basis yield?

A: Given, n= 182 days T bill = 4%  Investment Yield = ?  Discount-basis yield= ?

Q: 5. Determine the capitalized cost of an expenditure of P 200,000 at time 0, P 25,000 in years 2…

A: Time value of money (TVM) is used to measure the value of money at different point of time in the…

Q: Builtrite's common stock is currently selling for $65 a share and the firm just paid an annual…

A: The cost of common stock can be calculated with the help of dividend growth model

Q: Suppose rRF = 6%, rM = 10%, and bi = 1.8. What is ri, the required rate of return on Stock i? Round…

A: Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…

Q: expansion project that requires an initial fixed asset investment of $2.15 million. The fixed asset…

A: NPV is net present value that can be found out from the present value of cash flow and initial…

Q: you run a small airline that operates ten 30 seat airplane flights per day. For each flight, you can…

A: Profit maximization is the process where the company makes the decisions regarding its operations…

Q: Five years after buying their first home, Scott and Mia's mortgage came up for renewal. Interest…

A: A mortgage is a loan for a property where the collateral for the loan is the property itself.

Q: 6. An elective project is currently under review. One alternative requires an initial investment of…

A: Here, MARR = 10% IRR of second alternative = 18.69% To Find: Best alternative =?

Q: An entrepreneur needs thousand of dollars to launch the global to lend him the money today (n=0) at…

A: Effective rate is the rate of interest considering the impact of the compounding of the interest…

Q: A Province of Manitoba $250,000 face value bond carrying a 2% coupon was issued on December 1, 2006,…

A: Here, Face value = $250,000 Coupon rate = 2% Time to maturity = 30 years Market yield (YTM) = 4.19%…

Q: 6. When Alice and Mark's first child was one month old, and at the end of every month thereafter,…

A: The equal payment flow which occurs for a finite period and ends after lapse of finite time period…

Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.