International Finance Homework

timer Asked: Apr 27th, 2016

Question description

1.  If a foreign project has a positive NPV but NPV is greater from the parent’s than from the project perspective, then the parent firm should:

A.  Accept the project and decide whether to hedge currency risk based on the firm’s risk of policies

B.  Accept the project and hedge the foreign currency cash flows

C.  Accept the project and hire a local consultant to value the expected future cash flow capital

D.  Reject the project and continue to look for higher- NPV projects

2.  Victor’s Secret plans to sell $10 million accounts receivable due in one year to Union Bank of Switzerland. UBS charges a fee of 2 percent for purchasing the receivables and is willing to buy the receivables at a discount rate of 4 percent compounded quarterly. What is the all-in cost of the receivables?

A.  19.37%

B.  10.45%

C.  10.20%

D.  6.18%

E.  6.12%

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