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Finance
GE Products has fixed operating costs of US$380,000, variable operating costs of US$16 per unit, and a selling price of US$63.50 per unit.a. Calculate the operating breakeven point in units.b.
Lara Corporation has fixed operating costs of US$72,000, variable operating costs of US$6.75 per unit, and a selling price of US$9.75 per unit. a. Calculate the operating breakeven point in units.
Summarize the pros and cons of operating leverage.
Assume that Lehman's Repo 105 transactions fall within the limits allowed by Generally Accepted Accounting Principles as Lehman's management has argued. What are the ethical implications of
Who are holders of record? When does a stock sell ex dividend?
AlSamadi's Cafes, Inc. has declared a dividend of US$1.30 per share for share holders of record on Tuesday, May 2. The firm has 200,000 shares outstanding and will pay the dividend on May 24. How
Muscat Masa Trading Companies has the following stockholders' equity account. Common stock (350,000 shares at US$3 par)..................US$1,050,000 Paid in capital in excess of
The board of alKhalili Industries is considering a new dividend policy that would set dividends at 60 percent of earnings. The recent past has witnessed earnings per share (EPS) and dividends paid
The current stockholders' equity account for Hadeel Farms is as follows: Common stock (50,000 shares at US$3 par)..........US$150,000 Paid in capital in excess of
Cash versus stock dividend Manama Tool has the following stockholders' equity account. The firm's common stock currently sells for US$4 per share. Preferred
Sarah Wassim currently holds 400 shares of NutriFoods. The firm has 40,000 shares outstanding. The firm most recently had earnings avail able for common stockholders of US$80,000, and its stock
Nabeeh Dawood owns 400 shares of Apple Inc., which he purchased in September 2009 for US$18 per share. Apple is regarded as a high tech computer stock and has introduced new innovations in the
Dividend payment Karima Sameer wishes to purchase shares of Countdown Computing, Inc. The company's board of directors has declared a cash dividend of US$0.80 to be paid to holders of record on
As president of Young's of Cairo, a large clothing chain, you have just received a letter from a major stockholder. The stockholder asks about the company's dividend policy. In fact, the stockholder
Dividend constraints The Hawar Company's stockholders' equity account follows. Common stock (400,000 shares at US$4 par)...........US$1,600,000 Paid in capital in excess of
Badir Farm Equipment Sales, Inc., is in a highly cyclic business. Although the firm has a target payout ratio of 25 percent, its board realizes that strict adherence to that ratio would result in a
Given the earnings per share over the period 2005-2012 shown in the following table, determine the annual dividend per share under each of the policies set forth in parts a through d. Year Earnings
Casablanca Paper has the following stockholders' equity account. The firm's common stock has a current market price of US$30 per share. Preferred
Shaima Industries has a 120day operating cycle. If its average age of inventory is 50 days, how long is its average collection period? If its average payment period is 30 days, what is its cash
Mama Lulwa's Frozen Pizzas uses 50,000 units of cheese per year. Each unit costs US$2.50. The ordering cost for the cheese is US$250 per order, and its carrying cost is US$0.50 per unit per year.
Fatima Fashions has annual credit sales of 250,000 units with an average collection period of 70 days. The company has a per unit variable cost of US$20 and a per unit sale price of US$30. Bad debts
Kamal's Tools is considering offering a cash discount to speed up the collection of accounts receivable. Currently the firm has an average collection period of 65 days, annual sales are 35,000 units,
Alexandria Products is concerned about managing cash efficiently. On average, inventories have an age of 90 days, and accounts receivable are collected in 60 days. Accounts payable are paid
Ghazal Company currently makes all sales on credit and offers no cash discount. The firm is considering offering a 2 percent cash discount for payment within 15 days. The firm's current average
P&K Tool is considering lengthening its credit period from 30 to 60 days. All customers will continue to pay on the net date. The firm currently bills US$450,000 for sales and has US$345,000 in
Salman Corporation has daily cash receipts of US$65,000. A recent analysis of its collections indicated that customers' payments were in the mail an average of 2.5 days. Once received, the payments
Ahlam Mansoor, an assistant manager at a local department store, gets paid every 2 weeks by direct deposit into her checking ac count. This account pays no interest and has no minimum balance
AlGhanim Industries turns over its inventory 6 times each year; it has an average collection period of 45 days and an average payment period of 30 days. The firm's annual sales are US$3 million.
Jamil Jamal is interested in buying a new Jeep SUV. There are two options available, a V6 model and a V8 model. Whichever model he chooses, he plans to drive it for a period of 5 years and
Lamyee Enterprises is considering relaxing its credit standards to increase its currently sagging sales. As a result of the proposed relaxation, sales are expected to increase by 10 percent from
Lulwa Industries has a line of credit at Bank Two that requires it to pay 11 percent interest on its borrowing and to maintain a compensating balance equal to 15 percent of the amount borrowed. The
Wissam Catering Supply, Inc., needs to borrow US$150,000 for 6 months. State Bank has offered to lend the funds at a 9 percent annual rate subject to a 10 percent compensating balance. Currently
Casablanca Furniture wishes to establish a prearranged borrowing agreement with a local commercial bank. The bank's terms for a line of credit are 3.30 percent over the prime rate, and each year
Kuwait City Castings (KCC) is attempting to obtain the maximum loan possible using accounts receivable as collateral. The firm extends net-30-day credit. The amounts that are owed KCC by its 12
Bilal Finance factors the accounts of the Holder Company. All eight factored accounts are shown in the following table, with the amount factored, the date due, and the status on May 30. Indicate the
Eman Saqar works in an accounts payable department. She has attempted to convince her boss to take the discount on the 3/10 net 45 credit terms most suppliers offer, but her boss argues that giving
Dana Manufacturing has four possible suppliers, all of which offer different credit terms. Except for the differences in credit terms, their products and services are virtually identical. The credit
Jumma Marzooq has obtained a short-term loan from First Cairo Bank. The loan matures in 180 days and is in the amount of US$45,000. Jumma needs the money to cover startup costs in a new business. He
What factors would contribute to an expansion of the commercial paper market? What factors cause contraction in the commercial paper market?
During the past 2 years, MBC Industries issued three separate convertible bonds. For each of them, calculate the conversion price.a. A US$1,000-par-value bond that is convertible into 10 shares of
Mazin's Café is attempting to acquire the Victory Club. Certain financial data on these corporations are summarized in the following table. Item Mazin's Café Victory Club Earnings
CMD Corporation is interested in acquiring LTC Company by swapping 0.4 share of its stock for each share of LTC stock. Certain financial data on these companies are given in the following table.Item
George & Sons wishes to evaluate a proposed merger into the RCN Group. George had 2012 earnings of US$200,000, has 100,000 shares of common stock outstanding, and expects earnings to grow at an
Data for Hani Company and Mani Services are given in the following table. Hani Company is considering merging with Mani by swap ping 1.25 shares of its stock for each share of Mani stock. Hani
Zahra Corporation holds enough stock in Company A and Company B to give it voting control of both firms. Consider the accompanying simplified balance sheets for these companies.a. What percentage of
Who benefited and who lost when the Gulf Bank became 'too big to fail'? Explain the responsibilities and rules of each party: clients, banks, central bank, or/and the capital market regulators of
Fred Nadir is planning to take a tour through Italy this summer. The tour will cost: 2,750 and includes transportation, hotels, and a guide. Fred estimates that round-trip airfare from his home in
McCanna Corp., a U.S. firm, has a French subsidiary that produces wine and exports to various European countries. All of the countries where it sells its wine use the euro as their currency, which
Anheuser-Busch, (which is now part of AB InBev due to a merger), the producer of Budweiser and other beers, has engaged in a joint venture with Kirin Brewery, the largest brewery in Japan. The joint
Olmsted Co. has small computer chips assembled in Poland and transports the final assembled products to the parent, where they are sold by the parent in the U.S. The assembled products are invoiced
Arlington Co. expects to receive 10 million euros in each of the next 10 years. It will need to obtain 2 million Mexican pesos in each of the next 10 years. The euro is presently valued at $1.38 and
Much of the attention to the credit crisis was focused on its adverse effects on financial institutions, but many other types of firms were also affected. Explain why the numerator of the MNC
Because of the low labor costs in Thailand, Melnick Co. (based in the United States) recently established a major research and development subsidiary there. The wholly-owned subsidiary was created to
MNCs tend to expand more when they more easily access funds by issuing stock. In some countries, shareholder rights are very limited and so the MNCs are less able to raise funds by issuing stock.
Asheville Co. has a subsidiary in Mexico that develops software for its parent. It rents a large facility in Mexico and hires many people in Mexico to work in the facility. Ashville Co. has no other
Assume that Alpine Co. is a U.S. firm that has direct foreign investment in Brazil as a result establishing a subsidiary there. Political conditions have changed in Brazil, but the best guess by
a. Rochester Co. is a U.S. firm that has a language institute in France. This institute attracts Americans who want to learn the French language. Rochester Co. charges tuition to the American
Governments of many countries enact policies that can have a major impact on international trade flows. a. Explain how governments might give their local firms a competitive advantage in the
There is an ongoing debate between the U.S. and China regarding whether the Chinese yuan's value should be revalued upward. The cost of labor in China is substantially lower than that in the U.S. a.
Today, the stock price of Genevo Company (based in Switzerland) is priced at SF80 per share. The spot rate of the Swiss franc (SF) is $.70. During the next year, you expect that the stock price of
Go to the currency converter at finance.yahoo.com/currency and determine the bid/ask spread for the euro. Then determine the bid/ask spread for a currency in a less developed country. Why do you
Assume that during this semester, the euro appreciated against the dollar. Did the direct exchange rate of the euro increase or decrease? Did the indirect exchange rate of the euro increase or
Explain the relationship between transparency of firms and investor participation (or trading activity) among stock markets. Based on this relationship, how can governments of countries increase the
Identify some of the key factors that can allow for stronger governance and therefore increase participation and trading activity in a stock market.
Explain how the international integration of financial markets caused the credit crisis to spread across many countries.
Bloomington Co. is a large U.S.-based MNC with large subsidiaries in Germany. It has issued stock in Germany in order to establish its business. It could have issued stock in the U.S. and then used
As of today, the interest rate in Countries X, Y, and Z, are similar. In the next month, Country X is expected to have a weak economy, while Countries Y and Z are expected to experience a 6% increase
The Wolfpack Corporation is a U.S. exporter that invoices its exports to the United Kingdom in British pounds. If it expects that the pound will appreciate against the dollar in the future, should
In some periods, Brazil's inflation rate was very high. Explain why this places pressure on the Brazilian currency (called the Brazilian real).
How do you think the weaker U.S. economic conditions could affect capital flows? If capital flows are affected, how would this influence the value of the dollar (holding other factors constant)?
The country of Luta has large capital flows with the U.S. It has no trade with the U.S, and will not have trade with the U.S. in the future. Its interest rate is 6%, the same as the U.S. interest
Kurnick Co. expects that the pound will depreciate from $1.70 to $1.68 in one year. It has no money to invest, but it could borrow money to invest. It has been approved by a bank to borrow either 1
Assume you want to determine whether the monthly movements in the Polish zloty against the dollar are more volatile than monthly movements in some other currencies against the dollar. The zloty was
Assume that inflation is zero in the U.S. and in Europe and will remain at zero. U.S. interest rates are presently the same as in Europe. Assume that the economic growth for the U.S. is presently
Last year a dollar was equal to 7 Swedish kronor, and a Polish zloty was equal to $.40. Today, the dollar is equal to 8 Swedish kronor and a Polish zloty is equal to $.44. By what percentage did the
The country of Zars has large capital flows with the U.S. It has no trade with the U.S, and will not have trade with the U.S. in the future. Its interest rate is 6%, the same as the U.S. interest
The country of Vezot has massive capital flows with the U.S. because it has no restrictions on the movement of investment funds into or out of the country. Vezot's inflation rate just increased
Assume the country of Neeland has stable and predictable international trade flows with the U.S. Neeland is periodically in the news because its government might have problems repaying its debt owed
The New Zealand dollar's spot rate was equal to $.60 last month. New Zealand conducts much international trade with the U.S. but that the financial (investment) transactions between the two countries
Assume that one year ago, the spot rate of the British pound was $1.70. One year ago, the one-year futures contract of the British pound exhibited a discount of 6%. At that time, you sold futures
Assume the Hong Kong dollar (HK$) value is tied to the U.S. dollar and will remain tied to the U.S. dollar. Last month, a HK$ = 0.25 Singapore dollars. Today, a HK$=0.30 Singapore dollars. Assume
The country of Zapakar has much international trade with the U.S. and other countries, as it has no significant barriers on trade or capital flows. Many firms in Zapakar export common products
The U.S., Argentina, and Canada commonly engage in international trade with each other. All the products traded can easily be produced in all three countries. The traded products are always invoiced
Assume that the U.S. has a weak economy and that the Fed wants to correct this problem by adjusting the value of the dollar. The Fed is not worried about inflation. Assume that the Eurozone has a
Assume that the Federal Reserve engages in intervention by exchanging a very large amount of Canadian dollars for U.S. dollars in the foreign exchange market. a. Should this increase, reduce, or
a. Explain the dilemma that the European Central Bank (ECB) faces as it attempts to help countries with large budget deficits. b. Describe the types of conditions that the ECB required when
a. Explain why one country abandoning the euro could reduce the value of the euro, even if that country accounts for a very small proportion of the total production among all Eurozone participants.
Assume that cross exchange rates are always proper such that triangular arbitrage is not feasible. While at the Miami airport today, you notice that a U.S. dollar can be exchanged for 125 Japanese
Assume that interest rate parity exists. As of this morning, the 1-month interest rate in Canada was lower than the 1-month interest rate in the U.S.. Assume that as a result of the Fed's monetary
Assume that the spot rate of the Brazilian real is $.30 today. Assume that interest rate parity exists. Obtain the interest rate data you need from Bloomberg.com to derive the one-year forward rate
Assume that interest rate parity exists. The spot rate of the Argentine peso is $.40. The one-year interest rate in the U.S. is 7% versus 12% in Argentina. Assume the futures price is equal to the
Today, the one-year U.S. interest rate is 4%, while the one-year interest rate in Argentina is 17%. The spot rate of the Argentine peso (AP) is $.44. The one-year forward rate of the AP exhibits a
Assume zero transactions costs. As of now, the Japanese one-year interest rate is 3 percent, and the U.S. one-year interest rate is 9 percent. The spot rate of the Japanese yen is $.0090 and the
Earlier this morning, the annual U.S. interest rate was 6 percent and Mexico's annual interest rate was 8 percent. The spot rate of the Mexican peso was $.16. The one-year forward rate of the peso
The bank is willing to buy dollars for 0.9 euros per dollar. It is willing to sell dollars for .91 euros per dollar. You can sell Australian dollars (A$) to the bank for $.72. You can buy Australian
Alabama Bank is willing to buy or sell British pounds for $1.98. The bank is willing to buy or sell Mexican pesos at an exchange rate of 10 pesos per dollar. The bank is willing to purchase British
Biscayne Co. will be receiving Mexican pesos and today and will need to convert them into Australian dollars. Today, a U.S. dollar can be exchanged for 10 Mexican pesos. Also, an Australian dollar is
You obtain the following quotes from different banks. One bank is willing to buy or sell Japanese yen at an exchange rate of 110 yen per dollar. A second bank is willing to buy or sell the Argentine
Interest rate parity exists between the U.S. and Poland (its currency is the zloty). The one-year risk-free CD (deposit) rate in the U.S. is 7%. The one-year risk-free CD rate in Poland is 5% and
As of now, the nominal interest rate is 6% in the U.S. and 6% in Australia. The spot rate of the Australian dollar is $.58, while the one-year forward rate of the Australian dollar exhibits a
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