8 What exists between industries in a value chain (circle all that apply) ? (A)
ID: 2797494 • Letter: 8
Question
8 What exists between industries in a value chain (circle all that apply) ?
(A) Bond markets
(B) Markets for initial public offerings
(C) Equity markets
(D) Markets setting the price of a product supplied to the next
Industry in the chain
9 If you are run a manufacturing plant that buys rare earth metals to make semiconductors. Are you long or short rare earth metals ?
(A) Long
(B) Short
(C) Both
(D) Neither
10 If you are long something, in order to hedge what should you do ?
(A) Go long something else
(B) Go short something else
11 Your company is considering purchasing another company for $10 million. The present value of the cash flow from the company is projected by your staff to be $9 million. You believe you can even further improve the profitability of the company buy reducing the annual costs of the company by $1 million per year for the next 10 years. You have alternative investments available to you that earn 10% returns. What is the NPV of
this purchase?
Explanation / Answer
Answer 8) d)
Markets setting the price of a product supplied to the next Industry in the chain.There is a linkage between a firm's chain and the Value Chain of its suppliers and Channels.
Answer 9) b) Short beacuse they are seldom found in sufficient amounts to be extracted economically.
Answer 10) a) Go long something else.
A long hedge is beneficial for a company that knows it has to purchase an asset in the future and wants to lock in the purchase price.A long hedge can be used to hedge against a short position that has already taken by the investor.
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