1. Suppose iPhone is the only good produced and is identical across the world. An iPhone costs 5 CAD in Canada, and 4 USD in America. The nominal exchange rate is 1USD = 1.3 CAD. What is the real exchange rate between US and Canada? According to the Law of One Price, is the Canadian dollar over-valued or under-valued?
2. Using free cash flows to the firm, what is Johnson, inc’s value per share? Assume fcff=$250 million, fcfe=$200 million; Wacc=10%, Re=15%. There's 50 million shares outstanding and FCFF is expected to grow 7% and FCFE is expected to grow at 6%.