Question 1

Using the APV method, what is the value of the debt side effects?

Accepted Answer

A) $239,072,652.70 
B) $66,891,713.66 
C) $59,459,301.03 
D) $660,000,000 
E) None of the above 
A) $239,072,652.70 
B) $66,891,713.66 
C) $59,459,301.03 
D) $660,000,000 
E) None of the above

Question 2

Find the euro-zone cost of capital to compute is the dollar-denominated NPV of this project.

Accepted Answer

The answer of Find the euro-zone cost of capital to...

Question 3

Find the NPV in euro for the French firm if they wait one year to undertake the project after the exchange rate rises to S1(€|£) = €2.20 per £.

Accepted Answer

Question 4

The CFO who has a CFA notices the optionality in starting this project today. He asks you to comment and outline your valuation strategy.

Accepted Answer

@#IMG-DLM&_TB2454_00

Question 5

What is CF1 in dollars?

Accepted Answer

The answer of What is CF1 in dollars?...

Question 6

In the APV model

Accepted Answer

A) interest tax shields are discounted at i. 
B) operating cash flows are discounted at Ku. 
C) depreciation tax shields are discounted at i. 
D) all of the above 
A) interest tax shields are discounted at i. 
B) operating cash flows are discounted at Ku. 
C) depreciation tax shields are discounted at i. 
D) all of the above

Question 7

Perhaps the most important decisions that confront the financial manager are

Accepted Answer

A) which capital projects to select. 
B) the correct capital structure for the firm. 
C) the correct capital structure for projects. 
D) none of the above 
A) which capital projects to select. 
B) the correct capital structure for the firm. 
C) the correct capital structure for projects. 
D) none of the above

Question 8

Your firm's existing bonds trade with a yield to maturity of eight percent. The state of Missouri has offered to loan your firm $10,000,000 at zero percent for five years. Repayment will be of the form of $2,000,000 per year for five years the first payment is due in one year. What is the value of this offer?

Accepted Answer

A) $4,729,622.75 
B) $2,014,579.93 
C) $0 
D) $196,929.88 
E) None of the above 
A) $4,729,622.75 
B) $2,014,579.93 
C) $0 
D) $196,929.88 
E) None of the above

Question 9

Using the flow to equity methodology, what is the value of the equity claim?

Accepted Answer

A) -$1,540,000 
B) $446,570,866.00 
C) $36,580,767.55 
D) $470,953,393.70 
E) $30,716,236.13 
A) -$1,540,000 
B) $446,570,866.00 
C) $36,580,767.55 
D) $470,953,393.70 
E) $30,716,236.13

Question 10

Using the APV method, what is the value of this project to an all-equity firm?

Accepted Answer

A) -$46,502,288.10 
B) $12,494,643.75 
C) $36,580,767.55 
D) -$67,163,445.12 
E) $59,459,301.03 
A) -$46,502,288.10 
B) $12,494,643.75 
C) $36,580,767.55 
D) -$67,163,445.12 
E) $59,459,301.03

Question 11

Which of the following statements is false about "borrowing capacity"?

Accepted Answer

A) it is an especially important point in international capital budgeting analysis because of the frequency of large concessionary loans. 
B) it creates tax shields for APV analysis regardless of how the project is actually financed. 
C) is synonymous to the "project debt". 
D) is based on the firm's optimal capital structure. 
A) it is an especially important point in international capital budgeting analysis because of the frequency of large concessionary loans. 
B) it creates tax shields for APV analysis regardless of how the project is actually financed. 
C) is synonymous to the "project debt". 
D) is based on the firm's optimal capital structure.

Question 12

Assume that the firm will partially finance the project with a subsidized $3,000,000 interest only 30-year loan at 8.0 percent APR with annual payments. Note that eight percent is less than the 10 percent that they normally borrow at. What is the NPV of the loan?

Accepted Answer

A) $198,469 
B) $53,979.83 
C) $102,727.55 
D) $1,334,851.09 
E) None of the above 
A) $198,469 
B) $53,979.83 
C) $102,727.55 
D) $1,334,851.09 
E) None of the above

Question 13

As of today, the spot exchange rate is €1.00 = $1.25 and the rates of inflation expected to prevail for the next year in the U.S. is 2% and 3% in the euro zone. What is the one-year forward rate that should prevail?

Accepted Answer

A) €1.00 = $1.2379 
B) €1.00 = $1.2139 
C) €1.00 = $0.9903 
D) $1.00 = €1.2623 
A) €1.00 = $1.2379 
B) €1.00 = $1.2139 
C) €1.00 = $0.9903 
D) $1.00 = €1.2623

Question 14

What is the NPV of the project using the WACC methodology?

Accepted Answer

A) $58,028.68 
B) $49,613.03 
C) $48,300.47 
D) $102,727.55 
E) None of the above Using the cash flow menu of a financial calculator: CF0 = -$100,000; C01 = $39,800; F01 = 4; C02 = $43,100; I = rWACC = 11.20; NPV = $48,300.47 
A) $58,028.68 
B) $49,613.03 
C) $48,300.47 
D) $102,727.55 
E) None of the above Using the cash flow menu of a financial calculator: CF0 = -$100,000; C01 = $39,800; F01 = 4; C02 = $43,100; I = rWACC = 11.20; NPV = $48,300.47

Question 15

What is the levered after-tax incremental cash flow for year 2?

Accepted Answer

A) $185,796,000 
B) $215,152,000 
C) $267,952,000 
D) $284,848,000 
E) None of the above 
A) $185,796,000 
B) $215,152,000 
C) $267,952,000 
D) $284,848,000 
E) None of the above

Question 16

Find the NPV in euro for the American firm if they wait one year to undertake the project after the exchange rate falls to S1($|€) = $1.40 per €. Assume that i€ doesn't change.

Accepted Answer

Question 17

Some of the factors (with selected explanations) used in calculating the basic "net present value" and the "incremental" cash flows of a capital project are: (i) - expected after-tax terminal value, including recapture of working capital
(ii) - net income, which belongs to the equity holders of the firm
(iii) - initial investment at inception
(iv) - depreciation, and the fact that depreciation is a noncash expense (i.e. it is removed from the calculation of net income, for tax purposes, but added back because it did not actually flow out of the firm)
(v) - weighted-average cost of capital
(vi) - the firm's after-tax payment of interest to debtholders
(vii) - economic life of the capital project in years
The "incremental" cash flows of a capital project is calculated by using:

Accepted Answer

A) (i), (ii), and (iii) 
B) (ii), (iv), and (vi) 
C) (i), (iii), (v), and (vii) 
D) (iv), (v), (vi), and (vii) 
A) (i), (ii), and (iii) 
B) (ii), (iv), and (vi) 
C) (i), (iii), (v), and (vii) 
D) (iv), (v), (vi), and (vii)

Question 18

Using the APV method, what is the value of the debt side effects?

Accepted Answer

A) $239,072,652.70 
B) $66,891,713.66 
C) $59,459,301.03 
D) $660,000,000 
E) None of the above 
A) $239,072,652.70 
B) $66,891,713.66 
C) $59,459,301.03 
D) $660,000,000 
E) None of the above

Question 19

When using the APV methodology, what is the NPV of the depreciation tax shield?

Accepted Answer

A) $32,051.52 
B) $25,777.35 
C) $22,794.65 
D) $97,152.98 
E) None of the above 
A) $32,051.52 
B) $25,777.35 
C) $22,794.65 
D) $97,152.98 
E) None of the above

Question 20

The financial manager's responsibility involves

Accepted Answer

A) increasing the per share price of the company's stock at any cost and by any means, ways and fashion that is possible. 
B) the shareholder wealth maximization. 
C) which capital projects to select. 
D) both b and c 
A) increasing the per share price of the company's stock at any cost and by any means, ways and fashion that is possible. 
B) the shareholder wealth maximization. 
C) which capital projects to select. 
D) both b and c

Using the APV method, what is the value of the debt side effects?

Find the euro-zone cost of capital to compute is the dollar-denominated NPV of this project.

Find the NPV in euro for the French firm if they wait one year to undertake the project after the exchange rate rises to S₁(€|£) = €2.20 per £.

The CFO who has a CFA notices the optionality in starting this project today. He asks you to comment and outline your valuation strategy.

What is CF1 in dollars?

In the APV model

Perhaps the most important decisions that confront the financial manager are

Using the flow to equity methodology, what is the value of the equity claim?

Using the APV method, what is the value of this project to an all-equity firm?

Which of the following statements is false about "borrowing capacity"?

Assume that the firm will partially finance the project with a subsidized $3,000,000 interest only 30-year loan at 8.0 percent APR with annual payments. Note that eight percent is less than the 10 percent that they normally borrow at. What is the NPV of the loan?

As of today, the spot exchange rate is €1.00 = $1.25 and the rates of inflation expected to prevail for the next year in the U.S. is 2% and 3% in the euro zone. What is the one-year forward rate that should prevail?

What is the NPV of the project using the WACC methodology?

What is the levered after-tax incremental cash flow for year 2?

Find the NPV in euro for the American firm if they wait one year to undertake the project after the exchange rate falls to S₁($|€) = $1.40 per €. Assume that i€ doesn't change.

Using the APV method, what is the value of the debt side effects?

When using the APV methodology, what is the NPV of the depreciation tax shield?

The financial manager's responsibility involves

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters

Exam 18: International Capital Budgeting

Using the APV method, what is the value of the debt side effects?

Find the euro-zone cost of capital to compute is the dollar-denominated NPV of this project.

Find the NPV in euro for the French firm if they wait one year to undertake the project after the exchange rate rises to S1(€|£) = €2.20 per £.

The CFO who has a CFA notices the optionality in starting this project today. He asks you to comment and outline your valuation strategy.

What is CF1 in dollars?

In the APV model

Perhaps the most important decisions that confront the financial manager are

Using the flow to equity methodology, what is the value of the equity claim?

Using the APV method, what is the value of this project to an all-equity firm?

Which of the following statements is false about "borrowing capacity"?

Assume that the firm will partially finance the project with a subsidized $3,000,000 interest only 30-year loan at 8.0 percent APR with annual payments. Note that eight percent is less than the 10 percent that they normally borrow at. What is the NPV of the loan?

As of today, the spot exchange rate is €1.00 = $1.25 and the rates of inflation expected to prevail for the next year in the U.S. is 2% and 3% in the euro zone. What is the one-year forward rate that should prevail?

What is the NPV of the project using the WACC methodology?

What is the levered after-tax incremental cash flow for year 2?

Find the NPV in euro for the American firm if they wait one year to undertake the project after the exchange rate falls to S1($|€) = $1.40 per €. Assume that i€ doesn't change.

Using the APV method, what is the value of the debt side effects?

When using the APV methodology, what is the NPV of the depreciation tax shield?

The financial manager's responsibility involves

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters

Find the NPV in euro for the French firm if they wait one year to undertake the project after the exchange rate rises to S₁(€|£) = €2.20 per £.

Find the NPV in euro for the American firm if they wait one year to undertake the project after the exchange rate falls to S₁($|€) = $1.40 per €. Assume that i€ doesn't change.