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How do you think its exports to Thailand 1. Assuming Blades enters into the agreement with Jogs, Ltd., how will its overall transaction exposure be affected? 2. Given that Thai roller blade manufacturers located in Thailand have begun targeting the U.S. roller blade market, how do you think Blades’ U.S. sales were affected by the depreciation of the Thai baht? How do you think its exports to Thailand and its imports from Thaila ...

Other / Other 13 Apr 2016

Impact of Country Perspective on Target Valuation 1. Are there any other factors Blades should consider in making its decision? In your answer, you should consider the price Skates’n’Stuff is asking relative to your analysis in question 1, other potential businesses for sale in Thailand, the source of the information your analysis is based on, the production process that will be employed by the target in the future, and t ...

Other / Other 13 Apr 2016

Russian target to produce personal computers 1. Global Expansion Strategy. Poki Inc., a U.S.-based MNC, is considering expanding into Thailand because of decreasing profit margins in the U.S. The demand for Poki’s product in Thailand is very strong. However, forecasts indicate that the baht is expected to depreciate substantially over the next three years. Should Poki expand into Thailand? What factors may affect its decision? ...

Other / Other 13 Apr 2016

How could regression analysis be used 1. Changes in Economic Exposure. Walt Disney World built an amusement park in France that opened in 1992. How do you think this project has affected Disney’s economic exposure to exchange rate movements? Think carefully before you give your final answer. There is more than one way in which Disney’s cash flows may be affected. Explain. 2. Lagged Effects of Exchange Rate Movements. C ...

Other / Other 13 Apr 2016

Most of Longhorn’s competition is from U.S. 1. Transaction Exposure. Aggie Co. produces chemicals. It is a major exporter to Europe, where its main competition is from other U.S. exporters. All of these companies invoice the products in U.S. dollars. Is Aggie’s transaction exposure likely to be significantly affected if the euro strengthens or weakens? Explain. If the euro weakens for several years, can you think of any cha ...

Other / Other 13 Apr 2016

Fischer Inc., exports products from Florida 1. Currency Effects on Cash Flows. How should appreciation of a firm’s home currency generally affect its cash inflows? How should depreciation of a firm’s home currency generally affect its cash outflows? 2. Transaction Exposure. Fischer Inc., exports products from Florida to Europe. It obtains supplies and borrows funds locally. How would appreciation of the euro likely affec ...

Other / Other 13 Apr 2016

Kanab Co. has a subsidiary in Canada that will generate earnings 1. Applying the Value-at-Risk Method. You use today’s spot rate of the Brazilian real to forecast the spot rate of the real for one month ahead. Today’s spot rate is $.4558. Use the value-at-risk method to determine the maximum percentage loss of the Brazilian real over the next month based on a 95 percent confidence level. Use the spot exchange rates at the e ...

Other / Other 13 Apr 2016

The Hong Kong dollar is presently pegged 1. Cross-Currency Relationships. The Hong Kong dollar (HK$) is presently pegged to the U.S. dollar and is expected to remain pegged. Some Hong Kong firms export products to Australia that are denominated in Australian dollars and have no other business in Australia. The exports are not hedged. The Australian dollar is presently worth 0.50 U.S. dollars but you expect that it will be worth 0.45 U ...

Other / Other 13 Apr 2016

How can a U.S. company use regression analysis to assess its economic exposure 1. Comparing Transaction and Economic Exposure. Erie Co. has most of its business in the U.S., except that it exports to Belgium. Its exports were invoiced in euros (Belgium’s currency) last year. It has no other economic exposure to exchange rate risk. Its main competition when selling to Belgium’s customers is a company in Belgium that sells ...

Other / Other 13 Apr 2016

Now that several countries in Europe participate in a single currency 1. Are there any reasons why the business that has been so successful in the United Kingdom will not necessarily be successful in other European countries? 2. If the business is diversified throughout Europe, will this substantially reduce the exposure of the Sports Exports Company to exchange rate risk? 3. Now that several countries in Europe participate in a s ...

Other / Other 13 Apr 2016