A small Michigan-based firm that produces and sells component parts to General Motors, Ford, and DaimlerChrysler wishes to extend market coverage to Europe and Japan. What type of market entry strategy would provide the best fit?

A stock has a 30% per year standard deviation of its logged returns. If you are modeling the stock price to value a derivative maturing in six months with eight binomial periods, what should u and d be?

A stock price follows a binomial process for two periods. In each period, it either increases by 20 percent or decreases by 20 percent. Assuming that the stock pays no dividends, value a derivative which at the end of the second period pays $10 for every up move of the stock that occurred over the previous two periods. Assume that the risk-free rate is 6 percent per period.

A supplier of copper tubing and wire has adopted a multidomestic strategy to enter the eastern European market. What factors should it assess in these countries in order to formulate its marketing strategy in each one. Explain.

AB Cable, Wire, and Fiber plans to open up a new factory three years from now, at which point it plans to purchase 1 million pounds of copper. Assume zero-coupon risk-free yields are going to remain at a constant 5 percent (annually compounded rate) for all investment horizons, there is no basis risk in forwards or futures, storage of copper is costless, markets are frictionless, and forward spot...

ABC Corp., which currently has no assets, is considering two projects that each cost $100. Project A pays off$120 next year in the good state of the economy and $90 in the bad state of the economy. Project B pays off$140 next year in the good state of the economy and $60 in the bad state of the economy. If the two states are equally likely, there are no taxes or direct bankruptcy costs, the...

ABC Industries is considering an investment that requires the firm to issue new equity. The project will cost $100, but will add $120 to the firm’s value. Although management believes the firm’s value is $1,000 without the new project, outside investors value the firm at $600 without the project. If the firm currently has 100 shares outstanding, how many new shares must it issue to finance...

ABC Metalworks wants to determine which model sheetcutter to purchase. Three choices are available, (1) machine 1 costs the least but must be replaced the most frequently, (2) machine 2 has average cost and average lifespan, and (3) machine 3 costs the most but needs only infrequent replacement. Assume all three machines meet production quality and volume standards. Annual maintenance is...

ABC, Inc., financed with both equity and $10 million in perpetual debt, has pretax cash flow estimates for the current year as follows: Probability Pretax Cash Flow 0.3 ………… $1.5 million 0.5 ………… $2 million 0.2 ………… $4 million The corporate tax rate is 40 percent, the effective personal tax rate on equity is 20 percent, and the interest rate on the perpetual debt is 10...

ABCO is considering selling off two of its four subsidiaries and reinvesting the proceeds in the remaining two subsidiaries, keeping the same relative investment proportions in the surviving two. Assuming that the three economic scenarios are equally likely, compute the return variance of the $4 billion in ABCO stock for each of the six possible pairs of subsidiaries remaining.