Question 8.P.8: BGD’s owners will sell the company to XYZ for £925,000. (a) ...

Applied International Finance Managing Foreign Exchange Risk and International Capital Budgeting

BGD’s owners will sell the company to XYZ for £925,000. (a) For XYZ, what is the acquisition’s NPV in British pounds? (b) What is the acquisition’s NPV in U.S. dollars?

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Question: 8.5

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Question: 8.4

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Question: 8.3

Extend the previous XYZ/DYA example. DYA’s owners are asking €800,000 for the business. Assume the time-0 actual spot FX rate is 1.80 $/€ and the time-0 intrinsic spot FX rate is 1.50 $/€. XYZ believes that the temporary overvaluation of the euro will be corrected before the time-1 cash flow ...

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Question: 8.2

The Eurozone firm DYA will generate one operating cash flow, expected to be €1 million at time 1. From the perspective of U.S. dollars, DYA’s FX operating exposure to the euro is 1 and cost of capital is 8.50%. XYZ Company, a U.S. multinational, is evaluating the acquisition of DYA. Assume r_f^$ ...

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Question: 8.1

A U.S. multinational’s Japanese division has an FX operating exposure to the yen of 1.60 and a hurdle rate in U.S. dollars of 9%. The risk-free rates are 5% in U.S. dollars and 2% in yen, and the volatility of the yen is 0.08. Assume the linear approximation RA-UIRP condition (global CAPM) in U.S. ...

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Question: 8.P.12

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Question: 8.P.11

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(a)

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Question: 8.P.9

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