My Life in a Page - 781 Words

Cough, cough. I’m sorry; please lean in close as I know I am not far from the Heavens. Pray, please listen to my story. Do you hear the sound of that baby? That was I breathing in my first breath. Ah, I can just smell the air of that spring day. I was born on March 18 1782 in Abbeville, South Carolina to Patrick and Martha Calhoun of Scotch-Irish descent. This hat here is an artifact from a confrontation between the Native Americans and my father and his family. My father lived but with four bullet holes to his hat but unfortunately my grandmother, two of my cousins, and my uncle did not make it. I graduated from Yale in the year 1804 but sadly I wasn’t able to deliver my senior speech â€Å"The Qualifications Necessary to Constitute a Perfect Statesman† since I was sick. I married my first-cousin-once-removed Floride Bonneau Calhoun on January 8, 1811. We had ten children together but only seven survived to adulthood. The other three died within a year of their birth. My fourth child, Anna Maria lived the longest, to the age of 58. She married Thomas Green Clemson who founded Clemson University. (http://www.clemson.edu/about/history/calhoun-clemson/johnccalhoun.html) I was called â€Å"The Young Hercules† and was described as â€Å"a master spirit who stamps his name upon the age in which he lives †¦ felling down the errors of his opponents with the club of Hercules.† (http://www.clemson.edu/about/history/calhoun-clemson/johnccalhoun.html) During and before the War of 1812 I was a warShow MoreRelatedAnalysis Of Four Seasons1515 Words   |  7 Pagestitled Four Seasons, it refers to the loss of a family member and the deterioration of that person in their final year of life. Life itself is represented in the book that draws upon happy memories with family. Death is also represented as the second life, where a parent might have to explain to a young child what happens when somebody dies and where are they now? 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In my opinion, what the lyricist refers as â€Å"food†Read MoreA Rose For A Slave Girl By Harriet Ann Jacobs1516 Words   |  7 PagesIn modern day American culture we can see many citizens striving to achieve the American dream of a brighter future, but imagine having your dream destroyed based on your physical appearance and ethnical background. In the novel Incidents in the Life of a Slave Girl by Harriet Ann Jacobs, the author writes in her first point of views and recounts her experiences as a slave during this time in American history which helps brings the attention of social issues amongst African American slave. The mainRead MoreThe Importance Of Corruption In Fahrenheit 4511209 Words   |  5 Pagesfingertips are banned. The dystopian novel that Ray Bradbury wrote takes you through the main character Guy Montag life as he discovers there s more to than what meets the eye. 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Test Bank Ch8 3616 Butler Free Essays

PART IV Managing the Risks of Multinational Operations Chapter 9 The Rationale for Hedging Currency Risk True/False 1. In a perfect financial market, financial contracts are zero-NPV investments. ANS: True. We will write a custom essay sample on Test Bank Ch8 3616 Butler or any similar topic only for you Order Now 2. If hedging currency risk is to add value to the stakeholders of the firm, then hedging must impact either expected future cash flows or the cost of capital or both. ANS: True. 3. If financial markets are informationally efficient, then corporate financial policy is irrelevant. ANS: False. Don’t confuse informational efficiency with a perfect market. Although the perfect market conditions ensure informational efficiency, informationally efficient markets can be imperfect. 4. Perfect financial markets are a necessary condition for corporate risk hedging to have value. ANS: False. Market imperfections are necessary conditions. 5. In perfect financial markets, corporate financial policy is irrelevant. ANS: True. 6. In a perfect financial market, the law of one price holds. ANS: True. 7. Equal access to perfect financial markets ensures that individual investors can replicate any financial action that the firm can take. ANS: True. 8. In perfect financial markets, corporate hedging policy has no value. ANS: True. 9. In perfect financial markets, corporate investment policy is irrelevant. ANS: False. Firm value depends entirely on the firm’s investments in a perfect financial market. 10. If corporate financial policy is to have value, then at least one of the perfect market assumptions cannot hold. ANS: True. 11. Real-world financial markets are perfect markets. ANS: False. Perfect markets are a theoretical ideal and not a practical reality. 12. Market imperfections are greater across national boundaries than within national boundaries. ANS: True. 13. In perfect financial markets, multinational corporations have an advantage over domestic firms in financing their investments. ANS: False. The law of one price holds in perfect financial markets. 14. Multinationals have a comparative advantage over domestic firms in exploiting cross-border differences in financial markets. ANS: True. 15. Progressive taxation is a system in which larger taxable incomes receive a higher tax rate. ANS: True. 16. Tax preference items are goods that are sold on a tax-free basis. ANS: False. Tax preference items are items such as tax loss carryforwards and carrybacks and investment tax credits that are used to shield corporate taxable income from taxes. 17. A call option is an option to buy an underlying asset at a predetermined price. ANS: True. 18. A call option is an option to â€Å"call in† or demand payment on a loan. ANS: False. A call option is an option to buy an underlying asset at a predetermined price. 19. Indirect financial distress costs are relatively unimportant for firms selling products for which quality and after-sale service are important. ANS: False. Reputation is easily eroded in these instances. 20. Managerial gamesmanship is least prevalent during financial distress. ANS: False. Gamesmanship is more prevalent during hard times. 21. Option values increase with an increase in the volatility of the underlying asset. ANS: True. 22. A decrease in the variability of firm value is good news for debt and bad news for the equity call option, other things held constant. ANS: True. 23. Corporate hedging of business risk unambiguously increases shareholder wealth when the firm is in financial distress. ANS: False. Because debtholders have first claim on corporate assets, corporate hedging of business risk helps debtholders first and may or may not help equityholders. 24. In the real world, corporate hedging policy can change expected future cash flows but is unlikely to reduce the cost of debt. ANS: False. Hedging policy can decrease the variability of firm value and can thus reduce the risk of debt and the required return charged by debtholders. 25. Direct costs of financial distress are far more important to corporate hedging decisions than are indirect costs. ANS: False. The indirect costs of financial distress influence the activities of firms not just in bankruptcy but prior to bankruptcy as well. 26. Underinvestment occurs when debtholders refuse to invest additional capital into the firm during financial distress. ANS: False. Underinvestment occurs when equity foregoes positive-NPV investments. 27. In financial distress, equity has an incentive to take on large risks in order to increase the value of the equity call option. ANS: True. 28. In Miller-Modigliani’s perfect world, the firm’s optimal investment criterion is â€Å"Accept all positive-NPV projects. ANS: True. 29. In practice, management’s objective is to maximize shareholder wealth. ANS: False. Managers act nominally as equity’s agents but, in actuality, in their own best interests. 30. Managers have little incentive to hedge company-specific risks. ANS: False. As undiversified stakeholders, managers are concerned with both systematic and unsystematic risk. 3 1. Managers have an incentive to hedge their unit’s transaction exposure to currency risk. ANS: True. 32. Hedging can increase firm value by reducing the costs of agency conflicts between managers and shareholders. ANS: True. 33. Exchange-traded options and futures contracts have a fixed cost per contract so that costs are proportional to the number of contracts traded. ANS: True. 34. The costs of hedging through operations are likely to be less burdensome for a large multinational corporation with diversified operations than for a small, less-diversified firm. ANS: True. Multiple Choice 1. The perfect market assumptions include each of the following except ____. a. equal access to market prices b. equal access to costless information c. frictionless markets d. rational investors e. table governments ANS: E 2. Frictionless financial markets could have which of the following? a. agency costs b. bid-ask spreads c. brokerage fees d. government intervention e. irrational investors ANS: E 3. Which risk management guidelines in a) through d) is not recommended by the Group of Thirty Global Derivatives Study Group? a. assess the credit risk arising from derivatives activities b. combine authority over trading and bookkeeping functions into a single department c. quantify market risk under adverse market conditions and perform stress tests d. alue derivatives positions at market e. all of the above are recommended ANS: B 4. Which of a) through d) is unlikely to result in a decision to hedge currency risk? a. bid-ask spreads on foreign exchange b. costs of financial distress c. differential taxes on income from different tax jurisdictions d. stakeholder game-playing e. all of the above are incentives to hedge ANS:A 5. Which of the following factors does not contribute to tax schedule convexity? a. Alternative Minimum Tax (AMT) rules in the United States b. progressive taxation c. sales taxes d. ax preference items e. all of the above contribute to tax schedule convexity ANS: C 6. Indirect costs of financial distress impact the firm in each of the following ways except ____. a. higher financial costs b. higher legal costs in bankruptcy c. higher operating costs d. lower revenues e. stakeholder gamesmanship ANS: B 7. Which of statements a) through c) regarding costs of financial distress is false? a. Both debt and equity unambiguously benefit from corporate risk hedging. b. Hedging can increase expected cash flows by reducing the costs of financial distress. c. Hedging can reduce debtholders’ required return and hence the cost of capital to the firm. d. All of the above are ANS: True. e. None of the above are ANS: True. ANS: A 8. Which of the following was most responsible for the collapse of Barings Bank? a. bankruptcy proceedings b. failure to monitor the activities of its traders c. index arbitrage d. index futures and options trading e. the 1991 fall in share prices on the Tokyo stock exchange ANS: B 9. Management has an incentive to hedge which of the following exposures? a. operating exposure b. transaction exposure c. ranslation (accounting) exposure d. all of the above e. none of the above ANS: D 10. Tax schedules are said to be progressive when ____. a. the effective tax rate is greater at high levels of taxable income than at low levels b. the effective tax rate is greater at low levels of taxable income than at high levels c. they do not discriminate on the basis of race, creed, or color d. when tax rates vary by the age o f the taxpayer e. none of the above ANS: A Problems 1. In what way is equity a call option on firm value? Tax schedule convexity: progressive taxation 2. Suppose corporate income up to $250,000 is taxed at a rate of 25 percent. Income over $250,000 is taxed at 40 percent. The taxable income of Quack Poultry will be either $200,000 or $300,000 with equal probability. Quack’s income variability arises entirely from an exposure to currency risk. a. Draw a graph like Figure 9. 2 depicting tax schedule convexity in the United States. b. What is Quack’s expected tax liability if it does not hedge its currency risk? c. What is Quack’s expected tax liability if it is able to completely hedge its currency risk exposure and lock in taxable income of $250,000 with certainty? . In what way does hedging have value for Quack Poultry? Direct and indirect costs of financial distress 3. A firm based in the United Kingdom has promised to pay bondholders ? 10,000 in one year. The firm will be worth either ? 9,000 or ? 19,000 with equal probability at that time depending on the value of the dollar. The firm will be worth ? 14,000 if it hedges against currency risk. a. Identify the values of debt and equity under unhedged and hedged scenarios assuming there are no costs of financial distress. b. Suppose the firm will incur direct bankruptcy costs of ? ,000 in bankruptcy. Identify the value of debt and of equity under both unhedged and hedged scenarios. c. In addition to the ? 1,000 direct bankruptcy cost, suppose indirect costs reduce the asset value of the firm to either ? 6,000 or ? 18,000 (before the ? 1,000 direct bankruptcy cost) with equal probability. Hedging results in firm value of ? 12,000 with certainty. Identify the value of debt and of equity under both unhedged and hedged scenarios. d. Can hedging add value to shareholders in this problem? Problem Solutions 1. If the firm’s assets are worth more than that promised to debtholders, equity will exercise its option to buy the assets of the firm from the debtholders at the exercise price. If firm assets are worth less than the promised claim, equity will not exercise its option and debt assumes control of the firm. Tax schedule convexity: progressive taxation 2. a. [pic] b. Expected taxes with no hedging: (? )[($200,000)(0. 25)] + (? )[($250,000)(0. 25)+($50,000)(0. 40)] = (? )($50,000) + (? )($82,500) = $66,250. c. Expected taxes with hedging: ($250,000)(0. 5) = $62,500 $66,250. d. Hedging allows Quack to minimize its expected tax liability. This increase in expected future cash flows to equity results in an increase in equity value. 3. a. If firm value is ? 9,000, equity will not exercise its option to buy the firm at a price of ? 10,000. In this case, equity receives nothing and debt receives ? 9,000. If the firm is worth ? 19,000, equity pays the bondholders ? 10,000 and retains the residual ? 9,000. Firm value can be broken down into E[VFIRM] = E[VBONDS] + E[STOCK] = [(? )(? 9,000)+(? )(? 10,000)] + [(? )(? 0)+(? (? 9,000)] = ? 9,500 + ? 4,500 = ? 14,000. Hedged, firm value can be broken down into VFIRM = VBONDS + VSTOCK = ? 10,000 + ? 14,000 = ? 14,000. In the absence of costs of financial distress, the reduction in the variability of firm value results in a reduction in call option value and a ?500 shift in value from equity to debt. b. Unhedged, firm value is decomposed as: E[VFIRM] = E[VBONDS] + E[STOCK] = [(? )(? 9,000 1,000)+(? )(? 10,000)] + [(? )(? 0)+(? )(? 9,000)] = ? 9,000 + ? 4,500 = ? 13,500. With hedging, VFIRM = VBONDS + VSTOCK = ? 10,000 + ? 4,000 = ? 14,000. As in the previous example, the reduction in the variability of firm value is accompanied by a ? 500 transfer of wealth from equity to debt. Hedging also avoids the deadweight ? 1,000 bankruptcy cost and yields an expected gain of (? )(? 1,000) = ? 500. In this example, debt captures the expected gain of ? 500. Equity will capture some of the gain if hedging results in lower interest payments on the next round of debt. c. Unhedged, firm value is E[VFIRM] = E[VBONDS] + E[STOCK] = [(? )(? 6,000 1,000) + (? )(? 10,000)] + [(? )(? 0)+(? )(? 8,000)] = ? 7,500 + ? 4,000 = ? 11,500. If the firm hedges, then VFIRM = VBONDS + VSTOCK = ? 10,000 + ? 2,000 = ? 12,000. This is the same as b) after including indirect costs of financial distress with an expected value of [(? )(? 9,000 6,000)+(? )(? 19,000 18,000)] = ? 1,500+? 500 = ? 2,000. d. Hedging can add value to shareholders if they can negotiate lower interest payments on debt because of their hedging policies. Even in financial distress, equity could offer to renegotiate the bond contract to more evenly share the gain in firm value from hedging. In this way, they can share in any gain from reducing the probability and costs of financial distress. How to cite Test Bank Ch8 3616 Butler, Papers

What Caused the Dust Bowl free essay sample

The early 1900s were a time of turmoil for farmers in the United States, especially in the Great Plains region. After the end of World War I, overproduction by farmers resulted in low prices for crops. When farmers first came to the Midwest, they farmed as much wheat as they could because of the high prices and demand. Of the ninety-seven acres, almost thirty-two million acres were being cultivated. The farmers were careless in their planting of the crop, caring only about profit, and they started plowing grasslands that were not made for planting. Because of their constant plowing year after year and the lack of rainfall, the soil was quickly losing its fertility. With unfertile, dry land, the wheat crop started dying, and then blowing away with wind. Due to the improper farming, along with a long drought, dust storms made life in the Dust Bowl very burdensome. During the 1930s, the Great Plains was plagued with a drought, a long period of dryness, which brought demise to many of the farmers in the region. We will write a custom essay sample on What Caused the Dust Bowl? or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page This horrible drought started in 1930, a year that saw heavy rains in a very short time, which cause flooding in many areas of the Oklahoma Panhandle. The year continued to with horrible blizzards in the winter and a drought into the late summer. Many of the farms in the Great Plains, losing most of the crop, were greatly affected by the first droughts of the 1930s. The months of July and August saw about a forty-percent decrease of precipitation compared to previous years. From 1934 to 1936, A record drought hit the southwestern region. In 1934 the temperature was excruciatingly hot, causing many to die as a result of the heat. 1935 was a year where rainfall was very, very scarce. The heat began to rise at fast rates in the summer of 1936, with many days reaching above 120 degrees. The drought, along with the dust storms, were major reasons for poor farming in the Great Plains during the early to mid-1930s. Because of the drought, the ground became very dry in the Great Plains. This area, known as the Dust Bowl, was a region of horrible dust storms during most of the 1930s. The storms accompanied the drought and intensified the problems of the farmers. With the drought, many fields were not in a situation to grow crops. Since the fields were so dry, the topsoil would easily blow away with the passing  wind. In 1932 many fields were starting to be brutally damaged by the dust. The Oklahoma Panhandle was hit for twenty-two straight days of dust storms, which created drifts everywhere. This flying dirt killed off much of the crops. In a one-year span 139 days were considered to have had dust storms. Even though the dirt storms were less common in 1934, it was the year in which national attention was gained for the region because of the extreme heat. Also in 1934, approximately 350 million tons of soil was lost in just one storm. The following year was a time of large, powerful dust storms. During the month of May in 1935, a storm known as Black Sunday created winds up to sixty miles per hour and left many farms ruined. The storms were normality by 1935, and extreme weather was a common characteristic. The number of storms began to rise again in 1936, and the temperatures became scorching. But by the end of 1936, rain started to fall once again; however, the droughts soon returned and forced many farmers to leave their fields and to move west. By 1938 there was mixture of snow and dirt that reached blizzard like sizes, which were call snusters. These storms caused a great amount of destruction to the farms and sorrow to the farmers. With farms in horrible conditions, farmers in the Dust Bowl found farming a very difficult task. President Roosevelt and his New Deal tried to ease the pains of the farmers. The Agricultural Adjustment Administration (AAA) was formed to help out the farmers in their time of need. It paid farmers not to farm parts of their land to get prices back up. The Supreme Court ruled the AAA unconstitutional in 1936. Congress responded by passing the Soil Conservation and Domestic Allotment Act of 1936, which paid farmers to plant soil-conserving crops such as soybeans, or they could leave their land fallow. The AAA helped to lift the burden put on many farmers during the dirty 1930s, but the almost every farmer suffered greatly due to the drought, their farming, and dust storms.