Finance Questions, all including foreign currency exchange transactions

1. One year ago, a Canadian investor converted CAD to yen and purchased 100 shares of stock in a Japanese company at a price of 3,150 yen per share. The stock's total purchase cost was 315,000 yen.  At the time of purchase, 1 yen equaled $0.009574 CAD.  Today, the stock is selling at a price of 3,465 yen per share (a 10.00% rate of return in Japan), and in the currency market $1 CAD equals 124.527 yen.  The stock does not pay a dividend.  If the investor were to sell the stock today and convert the proceeds back to CAD, what would be his realized rate of return on his initial CAD investment from holding the stock?

2. The following exchange rates are quoted in the spot market:

$1 U.S. = 113.835 Japanese yen.
1 Canadian dollar = $1.09354 U.S.

Crane Cola is a U.S. company with worldwide operations.  The company can produce a liter of cola in Canada at a cost of 0.45 Canadian dollars.  The cola can be sold in Japan for 120 Japanese yen.  How much operating profit (measured in U.S. dollars) does the company make on each liter of cola sold in the Japanese market?

3. Parise Construction is considering whether to lease or buy some necessary equipment it needs for a project that will last the next 3 years.  If the firm buys the equipment, it will borrow $4,800,000 at 10% interest.  If it leases the equipment, the firm will make three equal end-of-year lease payments of $2,100,000.  The firm's tax rate is 40% and the firm's before-tax cost of debt is 10%.  Annual maintenance costs associated with ownership are estimated to be $240,000 and the equipment will be depreciated on a straight-line basis over 3 years.  What is the net advantage to leasing (NAL)?

4. Reading Railroad's common stock is currently priced at $30, and its 8 percent convertible debentures (issued at par, or $1,000) are priced at $850. Each debenture can be converted into 25 shares of common stock at any time before 2010. What is the conversion price, Pc, and the conversion value, Ct, of the bond?

5. Gekko Properties is considering purchasing Teldar Properties.  Gekko's analysts project that the merger will result in incremental after-tax net cash flows of $2 million, $4 million, $5 million, and $10 million over the next four years.  The terminal value of the firm's operations, as of Year 4, is expected to be $107 million.  Assume all cash flows occur at the end of the year.  The acquisition would be made immediately, if it is undertaken. Teldar's post-merger beta is estimated to be 2.0, and its post-merger tax rate would be 35%. The risk-free rate is 8%, and the market risk premium is 4%.  What is the value of Teldar to Gekko Properties?

6. Blumberg Inc. has an unlevered beta of 1.10.  The firm currently has no debt, but is considering changing its capital structure to be 40% debt and 60% equity.  Its corporate tax rate is 40%, rRF = 5% and the market risk premium is 4%.  What is Blumberg's cost of equity if it does change its capital structure?

7. Chandler Communications' CFO has provided the following information:

The company's capital budget is expected to be $5 million.
The company's target capital structure is 70% debt and 30% equity.
The company's net income is $4 million.

If the company follows a residual dividend policy, what will be its dividend payout ratio this year?

8. Tarheel Computing's stock was trading at $150 per share before its recent 3-for-1 stock split.  The 3-for-1 split led to a 5% increase in Tarheel's market capitalization.  What was Tarheel's price after the stock split?