Question: Help me answer the following James is considering a project which would cost $5,000 now. The annual benefits, for 4 years, would be a fixed
Help me answer the following
James is considering a project which would cost $5,000 now. The annual benefits, for 4 years, would be a fixed income of $2,500 a year, plus other savings of $500 a year in year 1, rising by 5% each year because of inflation. Running costs will be $1,000 in the first year, but would increase at 10% each year because of inflating labor costs. The general rate of inflation is expected to be 7'/2% and the company's required money rate of return is 16%. Is the project worthwhile? (Ignore taxation.) A project needs an initial investment in machinery of $300,000. Additional cash inflows of $120,000 at current price levels are expected for three years, at the end of which time the machinery will be scrapped. The machinery will attract taxallowable depreciation of 25% on the RB basis, which can be claimed against taxable profits of the current year, which is soon to end. A balancing charge or allowance will arise on disposal. The tax rate is 50% and tax is payable 50% in the current year, 50% one year in arrears. The pre-tax cost of capital is 22% and the rate of inflation is 10%. Assume that the project is 100% debt financed. Required Assess whether the project should be undertaken An Australian company is due to receive 15,000,000 from a Japanese company, payable in 4 months' time. The current exchange rate is 62.600062.8000 = A51. The Australian company elects to use a money market hedge to manage the exchange risk. The current annual borrowing and investing rates in the two countries are: Australia (%) Japan (%) Investing 4.5 2.7 Borrowing 6.0 3.3 exchange rate is 62.600062.8000 = A51. The Australian company elects to use a money market hedge to manage the exchange risk. The current annual borrowing and investing rates in the two countries are: Australia (%) Japan (%) Investing 4.5 2.7 Borrowing 6.0 3.3 Required; Calculate the amount the Australian company will receive if it uses a money market hedge. Robster, Gazza and Howard are all part of the same group Robster is based in the US, Gazza in the UK and Howard in Singapore. The following transactions took place between the three companies during the previous quarter of the current year. Paying subsidiary Receiving subsidiary Robster Gazza Howard Robster - US$50m US$20m Gazza 15m - 25m Howard S$33m S$45m The settlement currency is E sterling and the following exchange rates applied at the end of the previous quarter. 51.5500 2 1 552.800 = 1 Required; Illustrate the impact of multilateral netting on the group as a whole and the final transactions that are required to settle the net receipts and payments