--%>
Assignment Help - homework help

Problem on implied exchange rate

a) The Australian firm sold a ship to a Swiss firm and gave the Swiss client an option of paying either AUS10,000 or SF15,000 in 9 months.

(i) In above, the Australian firm efficiently gave the Swiss client a free option to buy up to AUS10,000 utilizing Swiss francs. What is the implied exercise exchange rate?

(ii) When the spot exchange rate turns out to be AUS0.62/SF, then which currency do you think the Swiss client will select to use for payment? Determine the value of this free choice for Swiss client?

(iii) What is the best method for the Australian firm to deal with exchange exposure? Clarify.

(b) Assume a firm enters into a swap agreement with the swap dealer. Explain the nature of default risk faced by both parties.

(c) Differentiate between the motives which encourage mergers and joint ventures among international firms and mergers and joint ventures amongst local firms.

   Related Questions in Corporate Finance

  • Q : Explain company creates value for its

    Is this true that a company creates value for its shareholders in a year when this distributes dividends or when the quotation of the shares increases?

    		•
  • Q : Explain consensus among the chief

    Is there any consensus among the chief authors in finance concerning the market risk premium?

    		•
  • Q : Estimate stock's current price A

    A company currently pays a dividend of $3.75 per share, D0 = 3.75. It is estimated that the company's dividend will grow at a rate of 15% percent per year for the next 2 years, then the dividend will grow at a constant rate of 7% the

    		•
  • Q : Does the book value of the debt

    Does the book value of the debt all the time coincide with its market value?

    		•
  • Q : Efficiency Ratios Efficiency Ratios :

    Efficiency Ratios: These ratios comprise Receivables Turnover, Inventory Turnover, Asset Turnover and Net Working Capital Turnover ratios. Efficiency ratios show the utilization of Assets of the company thus as to generate Revenue that is, the best ut

    		•
  • Q : What repercussions do variations in

    What repercussions do variations in the oil price have on the value of a company?

    		•
  • Q : Problem on Bank branch networks While

    While banks across the United States and Europe are cutting down their number of branches, the number of bank branches in Hong Kong has increased in the same period. Hong Kong Monetary Authority statistics show the number of bank branches in Hong Kong at the end of 20

    		•
  • Q : Explain value of shares is Is this

    Is this correct that the value of the shares is, the “value of the results’ capitalization” that, as per to the Institute of Accounting and Auditing (ICAC) shows “the sum of the expected future results of the company throughout a certain period

    		•
  • Q : Is depreciation is the loss of value of

    Is the depreciation is the loss of value of fixed assets?

    		•
  • Q : Problem on optimal capital structure

    XYZ Company has debt/assets ratio 50%, that is too high and it must be at 45% to be optimal. This debt reduction must also reduce the bankruptcy costs by $30 million. At present, XYZ has 5 million shares of common stock selling at $50 each. The tax rate of XYZ is 30%.

    		•