In Clemens v. McNamee, major league pitcher Roger Clemens sued McNamee, a trainer, over McNamee's statements to investigators an
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Answer:
<u>Floating exchange rate</u>
Here the market decides the value of the currency as it trade freely in the market based on supply and demand.
Argument For;
Market Based - It is market based therefore it reflects the true value of the currency.
Argument Against;
Uncertainty - As it trades according to the whims of supply and demand, telling which direction it will go in terms of value is a difficult undertaking therefore financial decisions based on such are riskier.
<u>Fixed exchange rate</u>
Here the value of the currency is fixed either to the value of another currency or to the price of gold.
Argument For;
No Uncertainty - As the currency is tied to another currency which is usually more stable or gold, the rate of the currency is more predictable.
Argument Against;
Unknown Elements
<u>Managed float</u>
In this exchange rate regime, the Central bank of a country intervenes in the Foreign exchange market to push or pull the currency in the direction that it prefers.
Argument For;
Government intervention - The Government Intervention ensures that the currency's value remains stable as well as allowing the Central bank to maintain a good balance of payments.
Argument Against;
Difficult - Maintaining the currency within the band preferred in a difficult undertaking that requires constant intervention in the Forex market.
<u>Pegged exchange rate</u>
The Central bank in this instance pegs the currency to a basket of currencies after setting an exchange rate it would prefer and then intervenes in forex market to keep it that way.
Argument For;
Reduces uncertainty - The movement of the currency is more predictable due to it being pegged to a basket of currencies.
Argument Against;
Continual government intervention - As this requires the currency to remain at a certain value, the government will keep intervening to ensure that it stays at that exact level.
<u>Target zone</u>
Here the Central Bank allows the currency to fluctuate on the market albeit with limits placed on how much it can do so.
Argument For;
Fluctuation with limits - By combining fixed regimes with floating regimes, the currency can maintain a semblance of true value whilst still be less uncertain.
Argument Against;
Limited options.
Answer and Explanation:
As per the data given in the question,
($ million) ($ million)
Year Cash flows PVF at 8.2% Present value
0 -8.05 1 -8.05
1 5.08 0.9242 4.70
2 5.08 0.8542 4.34
3 5.08 0.7894 4.01
Net present value 4.99
Internal rate of return 0.40
Net present value = $4.99 million
The project should be accepted
Yes, The IRR rule is agree with NPV.
Please find the attachment for better understanding
