Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribed

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)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finance And Financial Markets

Authors: Keith Pilbeam

3rd Edition

023023321X, 978-0230233218

More Books

Students also viewed these Finance questions

Question

4. Devise an interview strategy from the interviewers point of view

Answered: 1 week ago