financing and exchange rates 3

  • Complete a series of four problems in which you calculate financing and exchange rates.Note: The assessments in this course build upon each other, so you are strongly encouraged to complete them in sequence.
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    Questions to Consider

    To deepen your understanding, you are encouraged to consider the questions below and discuss them with a fellow learner, a work associate, an interested friend, or a member of the business community.

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    Resources

    Suggested Resources

    The resources provided here are optional. You may use other resources of your choice to prepare for this assessment; however, you will need to ensure that they are appropriate, credible, and valid. They provide helpful information about the topics in this unit. The MBA-FP6016 – Finance and Value Creation Library Guide can help direct your research. The Supplemental Resources and Research Resources, both linked from the left navigation menu in your courseroom, provide additional resources to help support you.The following resources will provide assistance to complete the assessment.

    The following texts are designed to assist learners to master core concepts, solve financial problems, and analyze results.

  • Assessment Instructions

    Demonstrate your understanding of financial concepts by completing the following problems. Where appropriate, show or explain your work. You may use Excel to work on the problems.Problem 1. Cash equation: Bettendorf Corporation has a book net worth of $17,800. The company’s long-term debt is $6,900. Its net working capital, excluding cash, is $1,600. Its fixed assets are $21,300. How much cash does the company have? If the current liabilities are $2,575, what are the current assets?Problem 2. Rights offerings: Borkin Incorporated is proposing a rights offering. Currently, there are 560,000 shares outstanding at $85 each. There will be 65,000 new shares offered at $78 each. Calculate each of the following:

    1. The new market value of the company.
    2. The number of rights that are associated with one of the new shares.
    3. The ex-rights price.
    4. The value of a right.

    Problem 3. Using spot and forward exchange rates: The spot exchange rate for the Canadian dollar (CAD) is 1.14 CAD and the six-month forward rate is 1.17 CAD. Calculate whether a U.S. dollar (USD) or a Canadian dollar is worth more.Problem 4. Cross-rates and arbitrage: The Japanese yen (JPY) exchange rate is 96 JPY = 1 USD, and the British pound (GBP) exchange rate is 1 GBP = 1.72 USD. Calculate the cross-rate in terms of yen per pound.

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