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Please answer all question and workings.. Tq Question 2 Chelmerford Ltd. has recently prepared its cash flow forecast for the following 6 months commencing 1
Please answer all question and workings.. Tq
Question 2 Chelmerford Ltd. has recently prepared its cash flow forecast for the following 6 months commencing 1 July 2016. This has identified a cash deficit of 12m in 2 months' time which will require short term financing for 3 months. The Director of Finance is concerned that interest rates will rise in the near future and has purchased an interest rate futures contract as follows: 2.5-5 FRA 5.00 -4.60 Required: (a) What will be the interest rate that Chelmerford will pay on its 12m borrowing? (Show all your support calculations) (10 marks) (b) Building on the success in its domestic market, Chelmsford Ltd. is now considering expanding operations into Europe and Asia, and has asked for your help in evaluating the risks that this will involve. Prepare a brief report to the Board summarising the different types of risk a company faces when operating in different countries. (7 marks) (c) Briefly discuss I. II. The difference between Equity share finance and Preference shares (2 marks) The factors that company's consider in deciding to hedge interest rates (6 marks) (Total: 25 marks) Question 2 Chelmerford Ltd. has recently prepared its cash flow forecast for the following 6 months commencing 1 July 2016. This has identified a cash deficit of 12m in 2 months' time which will require short term financing for 3 months. The Director of Finance is concerned that interest rates will rise in the near future and has purchased an interest rate futures contract as follows: 2.5-5 FRA 5.00 -4.60 Required: (a) What will be the interest rate that Chelmerford will pay on its 12m borrowing? (Show all your support calculations) (10 marks) (b) Building on the success in its domestic market, Chelmsford Ltd. is now considering expanding operations into Europe and Asia, and has asked for your help in evaluating the risks that this will involve. Prepare a brief report to the Board summarising the different types of risk a company faces when operating in different countries. (7 marks) (c) Briefly discuss I. II. The difference between Equity share finance and Preference shares (2 marks) The factors that company's consider in deciding to hedge interest rates (6 marks) (Total: 25 marks)
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