1. The current interest rate in the US is 8% per year, while it is 10% in the UK. Currently, in the spot market, US $1 can be exchanged for GBP 0.875. Calculate the amount of 120-days forward exchange rate between US $ and GBP? Do you think the GBP exchange rate is classified as a premium or discount?

2. Lanyala Corp is considering two alternatives to find funds: (1) issuing straight bonds, and (2) issuing bonds-with-warrant. Both types of bonds have a maturity of 5 years. Currently the government bond interest rate is 6% and Lanyala Corp wants to provide a premium of 4% above the interest rate on government bonds for straight bonds, and only 1% premium for bonds-with-warrant. Suppose each bond is sold at a face value of $ 100 million, and a corporate tax of 25% is known. Based on the data above, calculate what is the warrant value for the second alternative?

3. Dell Corp. is considering acquiring a startup company Asus Corp. Based on last year's financial statements, Asus Corp reported obtaining a free cash flow (FCF) of $ 400 million, and is expected to experience a constant growth of 5% every year. The acquisition will be funded with 60% equity, and the remainder with debt with a fixed interest of 12% per year. There is a market return of 15%, a government bond interest rate of 6%, and an Asus Corp beta amount of 0.8. Corporate tax is 25%. Calculate what is the fair value of Asus Corp as the target company to be acquired by Dell Corp.

4. A construction company is considering building a machine worth $ 200 million with an economic age of 4 years with two funding alternatives: (1) 100% debt with 14% interest annually for 4 years; (2) leasing. The following data are known: - The economic life of the asset is 4 years, and will be depreciated using the straight-line depreciation method - Maintenance costs per year: $ 30 million - 25% corporate tax - Annual lease rent of $ 60 million - Net residual value of $ 25 million Calculate which alternative is more efficient?