Q1. Your supplier is a German company and only accepts payments in Euros. To hedge the exchange rate risk in future, you should now _____

create a forward contract to convert USD into Euros

create a forward contract to convert Euros into USD

move to Germany

do nothing

Q2.A 10-yr project has an initial cost of $300,000 for fixed assets.The fixed assets will be depreciated to a $0 book value using a 20-yr straight line depreciation method.

Each year, annual revenue is $30,000 and cost is $10,000.

After 10 years, you will terminate the project. You expect to sell the the fixed assets for $200,000.

The project is financed by 30% equity and 70% debt. The required rate of return on equity is 7% and the borrowing cost is 3%.

Assume the tax rate is 25%.

What is the project's NPV?

-14,735

5,027

11,405

25,229