Section A.

Cost of capital=0.13

answer the following questions and Build all of your analysis within an EXCEL worksheet. Post EXCEL worksheet Attach excel worksheet.

You were hired by a firm that analyzes sports video and compiles statistics that are then provided to the customer. The firm is called SA (Sports Analysis). Please describe in general to the software developers what real option analysis is.

ACTION - EXPLAIN REAL OPTION ANALYSIS BRIEFLY IN OWN WORDS.

2. The firm is considering a project that with the following cash flows. Is this a good or bad project based on your analysis (compute NPV at a minimum). Use the interest rate given in previous question(0.13).

Project Soccer is expected to cost -200,000 and have cash flows of $50,000 in each of the next six years.

ACTION - EVALUATE PROJECT SOCCER GIVEN THE ABOVE INFORMATION.

3. New information has come available in which a competitor may enter the market. You believe that there is a 40% chance the competitor will enter the market. If the competitor enters the market your cost will not change, but your expected cash flows will be $30,000 in each of the next six years. If you invest now you do not know if the competitor will or will not be in the market.

ACTION - EVALUATE THE NPV GIVEN THE POSSIBLITY OF A COMPETITOR

4. An option the firm has is to wait a year and see if the other firm decides to enter the market. Using the same cash flow assumptions ($50,000 CF with no competitor and $30,000 CF with a competitor) evaluate the NPV given this option. Note if you wait you will know prior to your initial cost if the competitor will or will not enter the market.

ACTION -EVALUATE THE NPV GIVEN THE OPTION TO DELAY

ACTION - COMPUTE THE VALUE OF THE DELAY OPTION

5. Finally assume that the firm has another opportunity to invest $1 million in the soccer market. The investment will return $100,000 in each of the next four years. The initial investment will allow for the option to earn a contract that is valued at $2M at year five. The probability of earning this contract is 50%.

ACTION - COMPUTE THE VALUE OF THIS PROJECT GIVEN THE OPTION TO EXPAND (EARN THE CONTRACT).

Attach EXCEL spread sheet.

Section B.

The balance of payments (BOP), also known as balance of international payments, summarizes all transactions that a country's individuals, companies, and government bodies complete with individuals, companies, and government bodies outside the country. These transactions consist of imports and exports of goods, services, and capital, as well as transfer payments, such as foreign aid and remittances. A country's balance of payments and its net international investment position together constitute its international accounts. The balance of payments divides transactions in two accounts: the current account and the capital account. Sometimes the capital account is called the financial account, with a separate, usually very small, capital account listed separately. The current account includes transactions in goods, services, investment income, and current transfers. The capital account, broadly defined, includes transactions in financial instruments and central bank reserves. Narrowly defined, it includes only transactions in financial instruments. The current account is included in calculations of national output, while the capital account is not. ? Look into the data of Afghanistan from Trading Economics/UNCTAD?WITS/UNCOMTRADE/WORLD BANK) and prepare the BOP sheet of Afghanistan from 2015-2019? b)Discuss these arguments in light of political economy of trade policy, externalities and development? ? Articulate arguments for free trade that go beyond the conventional gains from trade. ? Explain how international negotiations and agreements have promoted world trade in Afghanistan context. ? Discuss the special issues raised by preferential trade agreements signed by Afghanistan in SAFTA.

Part c.

Explain the below questions.

Remaining Time: 2 hours, 27 minutes, 12 seconds, Question Completion Status: Which of the following examines the reasons for and effects of trade restriction? O A. Balance of payments. O B. Foreign exchange market. C. International trade policy. D. International trade theory. QUESTION 2 The open-economy macroeconomic processes for correcting balance of payments disequilibria are collectively called: O A. Discretionary fiscal policy, O B. Foreign Exchange market. O C. Monetary policy. O D. Adjustment in the balance of payments. QUESTION 3 The economic relationship and integration among nations is defined as: A. Microeconomics. O B. Economic Interdependence, O C, International trade. D. Open economics. Click Save and Submit to save and submit. Click Save All Answers to save all answers