1. Corporations can raise large amounts of money because:
shares of stock can be purchased in small amounts, so even small investors can participate.
investors always prefer to invest in stock so they can receive dividends.
stocks are always a good investment.
investing in the stock market is the surest way to get rich quick.
2. Consider the following information for the next problem:
Interest rate in the US 4%
Interest rate in Mexico 15% 16%, 17%
Mexican peso MXN/USD exchange rate $0.2200
3. You are a U.S. company and raise capital in the U.S. in dollars. You have an opportunity to make an investment that will cost 10 million pesos and will return 5 million pesos a year for 3 years. Your WACC is 10%. What is the NPV of your investment?
a. $38,857
b. $44,685
c. $51,388
d. $59,096
e. $67,961