Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Statistics and Probability Expert

Brooks Co. (a U.S. firm) considers a project in which it will have computer software developed. It would sell the software to Razon Co., an Australian company, and would receive payment of 10 million Australian dollars (A$) at the end of 1 year. To obtain the software, Brooks would have to pay a local software producer $4 million today. Brooks Co. might also receive an order for the same software from Zug Co. in Australia. It would receive A$4 million at the end of this year if it receives this order, and it would not incur any additional costs because it is the same software that would be created for Razon Co.

The spot rate of the Australian dollar is $.50, and the spot rate is expected to depreciate by 8 percent over the next year. The 1-year forward rate of the Australian dollar is $.47. If Brooks decides to pursue this project (have the software developed), it would hedge the expected receivables due to the order from Razon Co. with a 1-year forward contract, but it would not hedge the order from Zug Co. Brooks would require a 24 percent rate of return in order to accept the project.

a. Determine the net present value of this project under the conditions that Brooks receives the order from Zug and from Razon and that Brooks receives payments from these orders in 1 year.

b. Brooks recognizes there are some country risk conditions that could cause Razon Co. to go bankrupt. Determine the net present value of this project under the conditions that Brooks receives both orders but that Razon goes bankrupt and defaults on its payment to Brooks.

Statistics and Probability, Statistics

  • Category:- Statistics and Probability
  • Reference No.:- M91767260

Have any Question? 


Related Questions in Statistics and Probability

1 what is a factorial design why are factorial designs used

1. What is a factorial design? Why are factorial designs used more frequently than one-way designs? 2. How many independent variables are involved in a 3 x 3 factorial design? How many levels are there of each variable? ...

The average batter life of the iphone 4s is reported to be

The average batter life of the iPhone 4S is reported to be 6.0 hours by Apple. Assume that the population standard deviation for the better life for this cell phone is 30 minutes. A random sample of 50 iPhones had an ave ...

1 what is the minimum reliability coefficient that

1. What is the minimum reliability coefficient that researchers consider acceptable? Why do researchers use this minimum criterion for reliability? 2. For what kind of measure is it appropriate to examine test-retest rel ...

A business student is interested in estimating the 99

A business student is interested in estimating the 99% confidence interval for the proportion of students who bring laptops to campus. He wishes a precise estimate and is willing to draw a large sample that will keep the ...

The department of education would like to determine if

The Department of Education would like to determine if there are gender differences in the performance of twins on the state mandated mathematics examination. As a result, they have collected data on twelve sets of twins ...

An analyst from an energy research institute in california

An analyst from an energy research institute in California wishes to precisely estimate the 99% confidence interval for the average price of unleaded gasoline in the state. In particular, she does not want the sample mea ...

1 describe a 2 x 2 x 3 factorial design how many

1. Describe a 2 x 2 x 3 factorial design. How many independent variables are involved, and how many levels are there of each variable? How many experimental conditions are in a 2 x 2 x 3 factorial design? 2. Distinguish ...

Satistics project come up with a survey pick a population

Statistics Project: Come up with a survey: Pick a population Come up with 4 variablesà 2 Quantitative & 2 Qualitative (make up numbers) Pick 50 data points for each variable, make a table on excel, use a scatter plot gra ...

A researcher found a significant relationship between a

A researcher found a significant relationship between a student's IQ, x1, grade point average, x2, and the score, y, on the verbal section of the SAT test. The relationship can be represented by the multiple regression e ...

Christine has always been weak in mathematics based on her

Christine has always been weak in mathematics. Based on her performance prior to the final exam in Calculus, there is a 45% chance that she will fail the course if she does not have a tutor. With a tutor, her probability ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro