Exam 31: International Corporate Finance

Use the information for the question(s)below. You are a U.S.investor who is trying to calculate the present value of £5 million cash inflow that will occur one year in the future.The spot exchange rate is S = $1.8839/£ and the forward rate is F1 = $1.8862/£.The appropriate dollar discount rate for this cash flow is 5.32% and the appropriate £ discount rate is 5.24%. -The present value of the £5 million cash inflow computed by first discounting the £s and then converting into dollars is closest to:

Which of the following statements is FALSE?

How do we make adjustments when a project has inputs and outputs in different currencies?

Use the following information to answer the question(s)below. Incorporated Tool,a U.S.firm,is considering its international tax situation.The corporate tax rate in the United States is currently 21%.Incorporated Tool has major operations in Ireland,where the tax rate is 12.5%,Japan where the tax rate is 40.7%,and Mexico,where the tax rate is 30.0%.Incorporated Tool's profits,which are fully and immediately repatriated,and foreign taxes paid for the current year are as follows: -Assuming that the Irish and Mexican subsidiaries did not exist,the U.S.tax liability on the Japanese subsidiary would be closest to:

Luther Industries,a U.S.firm,is considering an investment in Japan.The dollar cost of equity for Luther is 12%.The risk-free interest rates on dollars and yen are r$ = 5.5% and r¥ = 1.5% respectively.Luther industries is willing to assume that capital markets are internationally integrated.Luther Industries needs to know the comparable cost of equity in Japanese yen for a project with free cash flows that are uncorrelated with spot exchange rates.The yen cost of equity for Luther Industries is closest to:

What is the purpose of the base erosion and anti-abuse tax (BEAT)minimum tax provision introduced by the Tax Cut and Jobs Act of 2017?

Consider the following equation: = (1 + )- 1 the term in this equation refers to:

Which of the following statements is FALSE?

Which of the following statements regarding the tax environment prior to the TCJA of 2017 is FALSE?

Which of the following statements is FALSE?

The dollar cost of debt for John Galt Industries is 8.0%.The firm faces a tax rate of 21% on all income,no matter where it is earned.Galt needs to know its Yen cost of debt.The risk-free interest rates on dollars and yen are r% = 6% and r¥ = 2%,respectively.Galt is willing to assume that capital markets are internationally integrated and that its free cash flows are uncorrelated with the yen-dollar spot rate.Galt's after-tax cost of debt in yen is closest to:

Consider the following equation: = (1 + )- 1 the term r¥ in this equation refers to:

Consider the following equation: S × = The term S in this equation is:

Consider the following equation: = (1 + )- 1 the term in this equation refers to:

Use the information for the question(s)below. KT Enterprises,a U.S.import-export trading company,is considering its international tax situation.KT's U.S.tax rate is 21%.KT has significant operations in both Japan and Ireland.In Japan the current exchange rate is ¥118.4/$ and earnings in Japan are taxed at 41%.In Ireland the current exchange rate is $1.27/€ and earnings in Ireland are taxed at 12.5%.KT's profits,which are fully and immediately repatriated,and foreign taxes paid for the current year are shown here (in millions): -After the Irish taxes are paid,the amount of the earnings before interest and after taxes in dollars from the Ireland operations is closest to:

Suppose the interest rate on Russian government bonds is 7.8%,and the current exchange rate is 26.8 rubles per dollar.If the forward exchange rate is 27.2 rubles per dollar,and the current U.S.risk-free interest rate is 4.6%,what is the implied credit spread for the Russian government bonds?

Use the following information to answer the question(s)below. Incorporated Tool,a U.S.firm,is considering its international tax situation.The corporate tax rate in the United States is currently 21%.Incorporated Tool has major operations in Ireland,where the tax rate is 12.5%,Japan where the tax rate is 40.7%,and Mexico,where the tax rate is 30.0%.Incorporated Tool's profits,which are fully and immediately repatriated,and foreign taxes paid for the current year are as follows: -Assuming that the Irish and Japanese subsidiaries did not exist,the U.S.tax liability on the Mexican subsidiary would be closest to:

Use the information for the question(s)below. Luther Industries,a U.S.Corporation,is considering a new project located in Great Britain.The expected free cash flows from the project are detailed below: You know that the spot exchange rate is S = 1.8862/£.In addition,the risk-free interest rate on dollars and pounds is 5.4% and 4.6% respectively.Assume that these markets are internationally integrated and the uncertainty in the free cash flow is not correlated with uncertainty in the exchange rate.You have determined that the dollar WACC for these cash flows is 10.2%. -What is the dollar present value of the project?

Which of the following statements regarding the taxation of international corporate profits is FALSE?

Use the following information to answer the question(s) below. Rearden Metal, a U.S. manufacturer, has made a purchase from d'Anconia Copper and is expecting a cash outflow of 2 million ARS (Argentine Pesos) in six months. The currency spot rate is $0.2500/ARS and the six-month forward rate is F6months = $0.2470/ARS. The appropriate annual discount rate for the Argentine Peso is 6.5% and the annual discount rate for the U.S. dollar is 4%. -The present value of Rearden Metal's cash outflow computed by first discounting the cash flow at the appropriate Argentine Peso rate and then converting to dollars is closest to: