Recent empirical evidence has suggested a strong increase in demand for low-quality baseballs. It is reported that this sudden increase in the demand for baseballs stems from the rise in the popularity of Major League Baseball. Low quality baseballs are typically used as practice baseballs for little league baseball teams and for use in unorganized play.

Since the target market consists largely of young adolescents, it is believed that this venture has long-term profitability. As a result, these baseballs are currently marketed to little-league aged baseball players, globally. Many small producers, scattered globally currently serve this perfectly competitive market, where each firm is a price taker. A Haitian-American limited partnership is considering entering this market with a DFI project in Haiti. Barring political instability, Haiti is seriously considered because of its

endless supply of low-skill labor, its proximity to the U.S. (the major market where 80% of the demand resides) and the partnerships influence over the public policy through its lobbying efforts (in Haiti and in the U.S.). The general partner is a Haitian-American

with strong ties to her homeland. The partnership plans to employ all of the firm's inputs from Haiti and sell the baseballs in the global market, using the U.S. dollar as the currency habitat of price.

The project requires an initial investment of 100 million Gourdes and is expected to

produce profits of 50 million Gourdes in the first year of operation and 150 million

Gourdes in the second through fifth years of operations. Due to expected political unrest,

the project will be terminated and all relevant capital will be salvaged at 10% of initial

cost after the fifth year of operation. The current spot exchange rate is 38 Gourdes/1U.S.

$. The risk-free interest rate is 2% in the U.S. and 7% in Haiti. The multinational thinks

that the required rate of return on the market portfolio in the U.S. is 10%, and estimates

that the project beta is about 1.5. There is no information on the required rate of return in

Haiti.

4. (5 pts) What is the all-equity cost of capital (you are able to calculate)for this

project?

5. (10 pts) The partnership hires you as a consultant for the project. Your first

deliverable is to calculate the project's net present value to determine if the project

should be undertaken from an economic perspective.(Assume interest rates to remain

constant for maturities one-through five).

During the first year of operation, there is a failed coup attempt against the president of

Haiti. Dissidents attempt to oust the leader and members of his administration; as a result of the increase in political instability, Haitians react by transferring capital abroad in Off-

Shore accounts.

6. (10 pts) Analyze the effect of this political event on the Haitian Gourde/US$

exchange rate. What is the net effect on the nominal and real exchange rates?

7. (20 pts) Use supply/demand analysis to determine the net effect of the capital flight

on the dollar-price of the firm's baseballs, the number of baseballs produced and

profit level. Be very precise and carefully explain your results for full credit. (The

solution is graphical, not numerical.)

8. (10 pts) If the partnership wants to hedge against the volatility of the Gourde to

reduce or eliminate transaction and economic exposure, it can do so by using

forward contracts. Develop a hedging strategy using the expected future spot rates in

problem 7 to eliminate FX risk. (Assume the expected future spot rates are an

unbiased estimator of forward rates). What are the sizes of the contracts and their

maturities?

9. (10 pts) The firm may want to use the Haitian Gourde as the currency of habitat. If it

does so, it will sell the baseballs in the Haitian Gourde instead. Analyze this proposal

on economic exposure and risk, given the effect on the Gourde in problem 7.

10. (10 pts) Visit the website of the Chicago Mercantile Exchange. You find futures

exchange rates for a host of currencies and other commodities. Is there a Gourde/US

Dollar futures contract? What is the effect of the absence or presence of such a

contract on foreign direct investments in Haiti? Briefly explain.

11. (10 pts) If the firm instead chooses to hedge using the money market, how will this

strategy be implemented? Be as specific as possible.

Chapter_2_5th_Ed.ppt: Applied Resear Search results for All studies have so.. A Variable Is A Factor That Can Be. O Meta-analysis of existing data D Question 7 0.5 pts Research questions are often broad and need to be transformed into specific problem statements that are amenable to investigation. Research questions may generally be categorized into three basic types of questions: Descriptive, relationship, and difference O Descriptive, experimental, and qualitative O Comparative, causal, and correlational Past, present, and future Declarative, discriminative. and empirical D Question 8 0.5 pts The "statement of the purpose" in a research proposal is intended to: 21 APs Ae Ai Id Pr X N OP WHO MacBook Pro LA 4 5 8 g 0QUESTION 35 When comparing crosstabs to partial crosstabs, what type of results would suggest a spurious/intervening association? different patterns exist in the subgroups of the control variable there Is a large change in the strength only the direction and significance are the same but the strength is slightly different the same or very similar patterns exist in the subgroups of the control variable QUESTION 36 Which of the following statements about causation is false? cuasation is difficult to prove causation means that a specefic change in the independent variable will result in a know change in the dependent variable causation is difficult to measure causation and association mean the same thingQUESTION 4 Mariah is investigating how different strategies for reducing anxiety can improve test performance, while Angelica is studying the impact of stress on memory recall. Even though both are studying memory, Mariah's research would be considered research whereas Angelica's work would be considered _research. O a. objective; empirical Ob. applied; basic Oc. empirical; scientific Od. pseudoscientific; scientific QUESTION 5 2 Consider the following psychological experiment: Participants are put into either a happy or a sad mood by having them look at short videos of either an uplifting or depressing nature. They are then asked to rate pictures of people on their attractiveness. The independent variable in this study is Oa. perception of attractiveness. Ob. depression. Oc mood. Od. perception of the videos.Question 57 1 pts Rather curiously, the German language distinguishes among 30 different kinds of kisses. You hypothesize that German speakers can tell the difference between one kiss and another with greater accuracy than can English speakers. How does such a prediction relate to the linguistic relativity hypothesis? Is your hypothesis likely to be confirmed by empirical research? O Such a prediction is consistent with the linguistic relativity hypothesis. Your hypothesis is likely to be confirmed by empirical research. O Such a prediction is consistent with the linguistic relativity hypothesis. Your hypothesis is not likely to be confirmed by empirical research. O Such a prediction is inconsistent with the linguistic relativity hypothesis. Your hypothesis is likely to be confirmed by empirical research. Such a prediction is inconsistent with the linguistic relativity hypothesis. Your hypothesis is not likely to be confirmed by empirical research.Which of the following statements, confirmed by empirical research, would you be most likely to trust? O A. heart-themed advertising campaigns are among the most effective O B. sales circulars with coupons generate increased sales O C. using pictures of Pilgrims sells more turkeys O D. using orange and black during a campaign increases candy sales