Study guides, Class notes & Summaries

Question 1 Coxner Industries Berhad has an expected Earnings Before Interest and Taxes (EBIT) of $420,000 in perpetuity and a tax rate of 35 percent. The firm has $70,000 in outstanding debt at an interest rate of 8 percent and its unlevered cost of equity is 15 percent. Compute the Weighted Average Cost of Capital (WACC) of the levered firm with and without tax. Question 2 MH Berhad has expected earnings before interest and taxes of $8,100. The unlevered cost of capital is 11 percen...

QUESTION 1: Determine two benefits and two drawbacks of exchange traded funds versus mutual funds. QUESTION 2: Explain the function of convexity in bond portfolio and how modified duration and convexity are used to approximate the bond’s percentage change in price, given a large change in interest rates QUESTION 3: The Capital Asset Pricing Model contends that there is a systematic and unsystematic risk for an individual security. Which is the relevant risk variable and why is it relevant? W...

1. In the study of agency problem affecting MNCs elaborate the agency problem of MNCs 2. Establish 3 reasons why might agency costs be larger for an MNC than for purely domestic firm? 3. How does the trade related factor affect the exchange rate of a country? Explain 5. Why do firm expand the business internationally. Explain 6. Elaborate the rationale of PPP theory in relation to inflation. 7. Translate the expected relationship between the relative real interest rates of two c...

QUESTION 1: Fuji Software, Inc. has the following mutually exclusive projects. Year Project A Project B 0 -$15,000 -$18,000 1 9,500 10,500 2 6,000 7,000 3 2,400 6,000 a) Suppose Fuji’s payback period cutoff is two years. Which of these projects should be choosen? b) Suppose Fuji uses the NPV rule to rank these two projects. Which project should be choosen if the appropriate discount rate is 15%? QUESTION 2: An investment project has annual cash inflows of $5,000, $5,500, $6,000 and...

What is the most important factor that explains differences in living standards across countries? An increase in the overall level of prices in an economy is referred to as The term "productivity" Large or persistent inflation is almost always caused by Macroeconomics is a study of ________________- The circular flow of economic activity is a model of the ________________. As disposable income increases, consumption expenditures In the above figure, at a disposable income level of $20...

QUESTION 1: to pay for virtual acquisitions online. While many of its users and supporters call bitcoin “money”, several US regulatory agencies have recently denied bitcoin the currency status, the Commodities and Futures Trading Commission calling it, in a September 2015 decision, a “commodity”. What do you think? Why wouldn’t bitcoin qualify as money? QUESTION 2: Since you’re studying abroad for a year, your parents have just sent you a lump sum payment of $12,000 on the savings...

QUESTION 1: There are two governments: one cares about keeping output stable and the other cares about keeping prices stable. What could be their reactions to: A. An increase in consumer confidence B. An increase in the price of oil QUESTION 2: How would the following affect the level of output in the short run and the long run? A. An increase in the proportion of skilled labour in the workforce B. Globalization C. Increased immigration QUESTION 3: The government is concerned about ...

QUESTION 1: The nation of Pixley has an absolute advantage in everything it produces compared to the nation of Hooterville. Could these two nations still benefit by trading with each other? Explain QUESTION 2: Evaluate the following statement: If lower exchange rates increase a nation’s exports, the government should do everything in its power to ensure that the exchange rate for its currency is as low as possible. QUESTION 3: Japan generally runs a significant trade surplus. Do you think th...

QUESTION 1: Below is the data on Germany’s GDP extracted from Eurostat, the European Union’s statistical office, for the period 2005-2014. Real GDP is calculated with a fixed weight method and 2005 as the base year. Fill the table by calculating (i) The GDP deflator for each year (ii) The change in price level, in percentage terms QUESTION 2: Evaluate the following statement: “Even if the prices of a large number of goods and services in the economy increase dramatically, the rea...