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What factors should be considered by a U.S. firm 1. Floating-Rate Bonds. a. What factors should be considered by a U.S. firm that plans to issue a floating rate bond denominated in a foreign currency? b. Is the risk of issuing a floating rate bond higher or lower than the risk of issuing a fixed rate Eurobond? Explain c. How would an investing firm differ from a borrowing firm in the features (i.e., interest rate and currency’s ...

Other / Other 23 Apr 2016

Interaction Between Financing and Invoicing Policies 1. Cost of Financing. Assume that Seminole, Inc., considers issuing a Singapore dollar-denominated bond at its present coupon rate of 7 percent, even though it has no incoming cash flows to cover the bond payments. It is attracted to the low financing rate, since U. S. dollar-denominated bonds issued in the United States would have a coupon rate of 12 percent. Assume that either type ...

Other / Other 23 Apr 2016

Would the effective financing cost of the yen-denominated notes be affected 1. Given that Blades expects to use the cash flows generated by the Thai subsidiary to pay the interest and principal of the notes, would the effective financing cost of the baht-denominated notes be affected by exchange rate movements? Would the effective financing cost of the yen-denominated notes be affected by exchange rate movements? How? Business Ma ...

Other / Other 23 Apr 2016

What is the advantage of using simulation 1. Risk From Issuing Foreign Currency-Denominated Bonds. What is the advantage of using simulation to assess the bond financing position? 2. Bond Offering Decision. Columbia Corp. is a U.S. company with no foreign currency cash flows. It plans to either issue a bond denominated in euros with a fixed interest rate, or a bond denominated in U.S. dollars with a floating interest rate. It estimates ...

Other / Other 23 Apr 2016

Financing That Reduces Exchange Rate 1. Currency Diversification. Why would a U.S. firm consider issuing bonds denominated in multiple currencies? 2. Financing That Reduces Exchange Rate Risk. Kerr, Inc., a major U.S. exporter of products to Japan, denominates its exports in dollars and has no other international business. It can borrow dollars at 9 percent to finance its operations or borrow yen at 3 percent. If it borrows yen, it wi ...

Other / Other 23 Apr 2016

How does this expected financing cost compare 1. Using a spreadsheet, determine the expected annual effective financing percentage cost of issuing yen-denominated notes. How does this expected financing cost compare with the expected financing cost of the baht-denominated notes? 2. Based on your answers to the previous questions, do you think Blades should issue yen- or baht denominated notes? 3. What is the tradeoff involved? B ...

Other / Other 23 Apr 2016

What is the probability that the financing cost of issuing yen-denominated notes is lower 1. Construct a spreadsheet to determine the annual effective financing percentage cost of the yendenominated notes issued in each of the three scenarios for the future value of the yen. What is the probability that the financing cost of issuing yen-denominated notes is lower than the cost of issuing baht-denominated notes? Business Managemen ...

Other / Other 23 Apr 2016

Which type of bond should Sambuka issue 1. Exchange Rate Effects. Katina, Inc., is a U.S. firm that plans to finance with bonds denominated in euros to obtain a lower interest rate than is available on dollar-denominated bonds. What is the most critical point in time when the exchange rate will have the greatest impact? 2. Bond Financing Analysis. Sambuka, Inc. can issue bonds in either U.S. dollars or in Swiss francs. Dollar-denominated ...

Other / Other 23 Apr 2016

Determine the probability distribution of Gandor’s net present values Gandor Company is a U.S. firm that is considering a joint venture with a Chinese firm to produce and sell videocassettes. Gandor will invest $12 million in this project, which will help to finance the Chinese firm’s production. For each of the first three years, 50 percent of the total profits will be distributed to the Chinese firm, while the remaining ...

Other / Other 23 Apr 2016

How could Hawaii Co. achieve low-cost financing 1. Bond Financing Analysis. Hawaii Co. just agreed to a long-term deal in which it will export products to Japan. It needs funds to finance the production of the products that it will export. The products will be denominated in dollars. The prevailing U.S. long-term interest rate is 9 percent versus 3 percent in Japan. Assume that interest rate parity exists, and that Hawaii Co. believes ...

Other / Other 23 Apr 2016