1. Corporations can raise large amounts of money because:

shares of stock can be purchased in small amounts, so even small investors can participate.

investors always prefer to invest in stock so they can receive dividends.

stocks are always a good investment.

investing in the stock market is the surest way to get rich quick.

2. Consider the following information for the next problem:

Interest rate in the US            4%

Interest rate in Mexico           15%     16%, 17%

Mexican peso MXN/USD exchange rate        $0.2200

3. You are a U.S. company and raise capital in the U.S. in dollars. You have an opportunity to make an investment that will cost 10 million pesos and will return 5 million pesos a year for 3 years. Your WACC is 10%. What is the NPV of your investment?

a. $38,857

b. $44,685

c. $51,388

d. $59,096

e. $67,961