Luther Industries,a Canadian Firm,is Considering an Investment in Japan

question 113

Multiple Choice

Luther Industries,a Canadian firm,is considering an investment in Japan.The dollar cost of equity for Luther is 12%.The risk-free interest rates on dollars and yen are r_CAD = 5.5% and r_JPY = 1.5%,respectively.Luther industries is willing to assume that capital markets are internationally integrated.Luther Industries needs to know the comparable cost of equity in Japanese yen for a project with free cash flows that are uncorrelated with spot exchange rates.The yen cost of equity for Luther Industries is closest to:

• A)14.0%
• B)12.3%
• C)7.8%
• D)18.5%
• E)9.3%

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Definitions:

Exploratory Factor Analysis (EFA)

A statistical technique used to identify underlying structures (factors) that explain patterns of correlations within a set of observed variables.

Principal Components Analysis (PCA)

A statistical technique used to reduce the dimensionality of a dataset by transforming it into a set of linearly uncorrelated variables called principal components.

Factor Analysis

A statistical method used to identify underlying structures or factors among a set of observed variables by reducing data complexity.

Myth

A traditional story, especially one concerning the early history of a people or explaining some natural or social phenomenon, and typically involving supernatural beings or events.