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1) Assume interest rate differential in dollar and Swiss francs is 4% per annum (U.S. and Swiss interest rates are 7 and 3% respectively) and SF is in 1.4% premium against dollar, with spot rate at $.633/SF and 1 year forward in SF is $.6419/SF. What actions would you take to profit from above scenario given that you can borrow SF1, 000,000.00 or its dollar equivalent?

2) The investment in foreign subsidiary is evaluated to have positive NPV after discount rate used in the computations is adjusted for political risk and any advantages from diversification. Does that mean project is acceptable? Describe why or why not?  3) Provided the many issues that the firm requires addressing where as planning for a merger, which ones would be of main significance in finding the cost of capital? describe why?

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Basic Finance, Finance

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