Question

1If the direct rate in the United States for one euro is $1.15 per euro, and you are selling some equipment to a customer in Germany for $100,000, then the cost to that customer in euros is:

2 Vidmar Corp.’s common stock is selling at $25 per share. The company has 500,000 shares authorized, 105,000 shares issued, 100,000 shares outstanding, and 5,000 treasury shares. What is the company’s total equity market value?

3. Using the simple additive form, if a corporate bond has a yield of 5.5% and the risk free rate is 2.5%, then what is the risk premium?

Answer 1

Ans1	$/Euro	1.15
	sold equipment to customer at	$100,000
	Cost to customer in Euros will be	86,956.52	(100000/1.15)
Ans2	Market price of Vidmars common stock	$25
	Outstanding shares	100000
	So company's total equity market value is	$2500000	(25*100000)
Note: Treasury shares are those shares that where initially issued but required afterwards from the stockholders.
Hence the total outstanding shares doesn't include the treasury shares.
Ans3	Using additive model, Risk premium=yield-risk free rate
	So, risk premium=	5.5-2.5
	=	3%