Exam 31: International Corporate Finance

Whenever a project has cash flows that depend on the values of ________,the most convenient approach is to ________ the cash flows according to the currency they depend on.

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

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 Canadian risk-free interest rate is 4.6%,what is the implied credit spread for the Russian government bonds?

Canadian tax policy requires that a ________ is given for foreign taxes paid up to the amount of the ________.

The amount of the taxes paid in dollars for the Japanese operations is closest to:

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

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

Because obtaining forward rate quotes for as long as four years in the future is difficult,managers normally use the covered ________ to compute ________.

Use the information for the question(s) below. Luther Industries, a Canadian 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 pound present value of the project?

For Canadian companies,if the foreign project is a separately incorporated subsidiary of the parent,the amount of taxes a company pays generally depends on the amount of profits ________.

Use the information for the question(s) below. Luther Industries, a Canadian 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?

Use the information for the question(s) below. The current spot exchange rate, S, is $1.8862/£. Suppose that the yield curve in both countries is flat. The risk-free rate on dollars, r_$, is 5.35% and the risk-free interest rate on pounds, r_£, is 4.80%. -Using the covered interest parity condition,the calculated three-year forward rate F₃ is closest to:

Use the information for the question(s) below. You are a Canadian 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?

Use the information for the question(s) below. Luther Industries, a Canadian 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%. -Calculate the pound denominated cost of capital for Luther's project.

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

Which of the following statements is false?

Which of the following statements is false?

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

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