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QUESTION 77

1. For the next 6 questions suppose the following data holds:

   H&D is a U.S. multinational company with the following debt and equity components in its consolidated capital section. The company's cost of equity is 18%.

   10 year 6% Euro Bonds (euros) selling at par	8,000,000	Spot Rate ($/euro)	$1.1/euro
   20 year 8% Pound Bonds (pounds) selling at par	4,000,000	Spot Rate ($/)	$1.5/
   Common Stock	$30,000,000	Tax Rate	30.00%
   Retained Earnings	$5,000,000

   What is the current value of the 10-year euro bonds in U.S. dollars?

   		$8,800,000
   		$7,272,727
   		$9,600,000
   		$14,000,000

QUESTION 78

1. Continuation of the previous problem:

   H&D is a U.S. multinational company with the following debt and equity components in its consolidated capital section. The company's cost of equity is 18%.

   10 year 6% Euro Bonds (euros) selling at par	8,000,000	Spot Rate ($/euro)	$1.1/euro
   20 year 8% Pound Bonds (pounds) selling at par	4,000,000	Spot Rate ($/)	$1.5/
   Common Stock	$30,000,000	Tax Rate	30.00%
   Retained Earnings	$5,000,000

   What is the current value of the 20-year pound bonds in U.S. dollars?

   		$4,000,000
   		$2,666,667
   		$6,000,000
   		$7,000,000

QUESTION 79

1. Continuation of the previous problem:

   H&D is a U.S. multinational company with the following debt and equity components in its consolidated capital section. The company's cost of equity is 18%.

   10 year 6% Euro Bonds (euros) selling at par	8,000,000	Spot Rate ($/euro)	$1.1/euro
   20 year 8% Pound Bonds (pounds) selling at par	4,000,000	Spot Rate ($/)	$1.5/
   Common Stock	$30,000,000	Tax Rate	30.00%
   Retained Earnings	$5,000,000

   What is the weight of debt financing?

   		26.50%
   		68.63%
   		29.72%
   		73.50%

QUESTION 80

1. Continuation of the previous problem:

   H&D is a U.S. multinational company with the following debt and equity components in its consolidated capital section. The company's cost of equity is 18%.

   10 year 6% Euro Bonds (euros) selling at par	8,000,000	Spot Rate ($/euro)	$1.1/euro
   20 year 8% Pound Bonds (pounds) selling at par	4,000,000	Spot Rate ($/)	$1.5/
   Common Stock	$30,000,000	Tax Rate	30.00%
   Retained Earnings	$5,000,000

   What is the weight of equity financing?

   		73.50%
   		31.37%
   		70.28%
   		26.50%

QUESTION 81

1. Continuation of the previous problem:

   H&D is a U.S. multinational company with the following debt and equity components in its consolidated capital section. The company's cost of equity is 18%.

   10 year 6% Euro Bonds (euros) selling at par	8,000,000	Spot Rate ($/euro)	$1.1/euro
   20 year 8% Pound Bonds (pounds) selling at par	4,000,000	Spot Rate ($/)	$1.5/
   Common Stock	$30,000,000	Tax Rate	30.00%
   Retained Earnings	$5,000,000

   What is the WACC for the H&D Company?

   		10.67%
   		14.07%
   		13.85%
   		15.78%