Answer with Explanation:
Foreign exchange rates can have significant impact on the company's financial statements because the spot rate at that date can be affect the value of the company's assets. It is very common in consolidated financial statement of a multinational companies.
The impact on the financial statements can be as under:
- The fluctuation in currency value can under or over statement of assets. liabilities and Income & Expenses.
- The fluctuation makes the analysis of the financial statements meaningless. The performance of the company in a consolidated statement will be in a state that would not be better understood or time consuming by experts to develop understanding of what the financial statement is saying. It would be difficult for an ordinary person to understand the performance of the business.
- It can also also manipulate the value of the assets of the company because increase in devaluation of the currency means increase in inflation and vice versa.
- The value of the company acquired can be affected significantly which means that the investment (value of whole company) can turn into significant losses which means it can result reporting losses of in a consolidated financial statement. This would also result in decrease in the stock value of the group as a whole.
Answer:
The alpha of the stock is 3.7%.
Explanation:
Alpha is the abnormal or additional return expected or received on a stock in excess of the required rate of return for such a stock as calculated by the Security market line or Capital asset pricing model equation.
We first need to calculate the required rate of return for such a stock and then deduct that rate from the expected rate of return to reach at alpha or the abnormal return.
- Required rate of return (r) = 0.05 + 1.1 * (0.08 - 0.05) = 0.083 or 8.3%
The abnormal return or alpha for such a stock is,
- Alpha = 12% - 8.3% = 3.7%
Answer:
The cost of equity capital is 8.24%
Explanation:
The cost of equity capital of a firm is the required rate of return on a firm's equity. In case of common equity, the required rate of return (r) can be calculated using the CAPM approach. The formula for required rate of return or cost of equity capital under this model is,
r = rRF + Beta * rpM
Where,
- rRF is the risk free rate
- rpM is the risk premium on market
r = 0.025 + 0.77 * 0.0745
r = 0.082365 or 8.2365% rounded off to 8.24%
Answer:
12 and 20, has
Explanation:
The semiconductors sector is the best for U.S. export as well, and ensure a lot of American jobs, innovation, and growth. You will find a quite busy semiconductor manufacturing sector in USM and there is an extensive foreign market that led to semiconductor perennially, and hence ranking as among the US top export sector. Considering no international trade the price of the semiconductor is supposed to be 12 and 20 billion dollars worth semiconductors annually that are being bought and sold inside the US. And the US certainly has comparative advantages in producing semiconductors.
Trains are more efficient because they can carry many more goods than a truck can. In addition, they are faster because they go directly from one station to the next, without the worry of traffic.
