Recent Question

Merton Inc. has a subsidiary in Bulgaria 1. Divestiture Decision. Ethridge Co. of Atlanta, Georgia has a subsidiary in India that produces products and sells them throughout Asia. In response to the September 11, 2001 terrorist attack on the U.S., Ethridge Co. decided to conduct a capital budgeting analysis to determine whether it should divest the subsidiary. Why might this decision be different after the attack as opposed to before ...

Other / Other 13 Apr 2016

You want to assess the data in a logical manner 1. Exposure of an MNC’s Subsidiary. Decko Co. is a U.S. firm with a Chinese subsidiary that produces cell phones in China and sells them in Japan. This subsidiary pays its wages and its rent in Chinese yuan. The cell phones sold to Japan are denominated in Japanese yen. Assume that Decko Co. expects that the Chinese yuan will continue to be stable against the dollar. The subsidiaryà ...

Other / Other 13 Apr 2016

Determine the NPV of the acquisition of Skates’n’Stuff 1. Using a spreadsheet, determine the NPV of the acquisition of Skates’n’Stuff. Based on your numerical analysis, should Blades establish a subsidiary in Thailand or acquire Skates’n’Stuff? 2. If Blades negotiates with Skates’n’Stuff, what is the maximum amount (in Thai baht) Blades should be willing to pay? Business M ...

Other / Other 13 Apr 2016

Factors That Affect a Firm’s Translation 1. Factors That Affect a Firm’s Translation Exposure. What factors affect a firm’s degree of translation exposure? Explain how each factor influences translation exposure. 2. Translation Exposure. Consider a period in which the U.S. dollar weakens against the euro. How will this affect the reported earnings of a U.S.-based MNC with European subsidiaries? Consider a period i ...

Other / Other 13 Apr 2016

How can Sunbelt account for the Indonesian government’s position 1. Accounting for Government Restrictions. Sunbelt Inc. plans to purchase a firm in Indonesia. It believes that it can install its operating procedure in this firm, which would significantly reduce the firm’s operating expenses. However, the Indonesian government may approve the acquisition only if Sunbelt does not lay off any workers. How can Sunbelt possibly ...

Other / Other 13 Apr 2016

Factors that Affect the NPV of a Divestiture 1. Foreign Divestiture Decision. Baltimore Co. considers divesting its six foreign projects as of today. Each project will last one year. Its required rate of return on each project is the same. The cost of operations for each project is denominated in dollars and is the same. Baltimore believes that each project will generate the equivalent of $10 million in one year based on today’s ...

Other / Other 13 Apr 2016

There is currently no withholding tax on remittances 1. How Country Risk Affects NPV. Monk, Inc. is considering a capital budgeting project in Tunisia. The project requires an initial outlay of 1 million Tunisian dinar; the dinar is currently valued at $.70. In the first and second years of operation, the project will generate 700,000 dinar in each year. After two years, Monk will terminate the project, and the expected salvage value is ...

Other / Other 12 Apr 2016

Assauer Inc. would like to assess the country risk 1. Reducing Country Risk. MNCs such as Alcoa, DuPont, Heinz, and IBM donated products and technology to foreign countries where they had subsidiaries. How could these actions have reduced some forms of country risk? 2. Country Risk Ratings. Assauer Inc. would like to assess the country risk of Glovanskia. Assauer has identified various political and financial risk factors, as shown ...

Other / Other 12 Apr 2016

One of J.C. Penney’s biggest targets 1. How Country Risk Affects NPV. Explain how the capital budgeting analysis in the previous question would need to be adjusted if there were three possible outcomes for the British pound along with the possible outcomes for the British economy and corporate tax rate. 2. J.C. Penney’s Country Risk Analysis. Recently, J.C. Penney decided to consider expanding into various foreign coun ...

Other / Other 12 Apr 2016

When NYU Corp. considered establishing a subsidiary 1. Managing Country Risk. Why do some subsidiaries maintain a low profile as to where their parents are located? 2. Country Risk Analysis. When NYU Corp. considered establishing a subsidiary in Zealand, it performed a country risk analysis to help make the decision. It first retrieved a country risk analysis performed about one year earlier, when it had planned to begin a major exporti ...

Other / Other 12 Apr 2016