Recent Question

Determine the probability that the project’s NPV will be negative 1. The Risk and Cost of Potential Kidnapping. In 2004 following the war in Iraq, some MNCs capitalized on opportunities to rebuild Iraq. However, in April 2004, some employees were kidnapped by local militant groups. How should an MNC account for this potential risk when it considers direct foreign investment (DFI) in any particular country? Should it avoid DFI in a ...

Other / Other 12 Apr 2016

Which method of direct foreign investment 1. Accounting for Country Risk of Projects. Slidell Co. (a U.S. firm) considers a foreign project in which it expects to receive 10 million euros at the end of this year. It plans to hedge receivables of 10 million euros with a forward contract. Today, the spot rate of the euro is $1.20, while the oneyear forward rate of the euro is presently $1.24, and the expected spot rate of the euro in one y ...

Other / Other 12 Apr 2016

United Kingdom, and expects the salvage (terminal) value of the project 1. Effects of September 11. Arkansas Inc. exports to various less developed countries, and its receivables are denominated in the foreign currencies of the importers. It considers reducing its exchange rate risk by establishing small subsidiaries to produce products. By incurring some expenses in the countries where it generates revenue, it reduces its exposure to ex ...

Other / Other 12 Apr 2016

Explain some methods of reducing exposure 1. Incorporating Country Risk in Capital Budgeting. How could a country risk assessment be used to adjust a project’s required rate of return? How could such an assessment be used instead to adjust a project’s estimated cash flows? 2. Reducing Country Risk. Explain some methods of reducing exposure to existing country risk, while maintaining the same amount of business within a par ...

Other / Other 12 Apr 2016

The Sports Exports Company is considering the establishment The Sports Exports Company produces footballs in the U.S. and exports them to the United Kingdom. It also has an ongoing joint venture with a British firm that produces some sporting goods for a fee. The Sports Exports Company is considering the establishment of a small subsidiary in the United Kingdom. 1. Under the current conditions, is the Sports Exports Company subject to c ...

Other / Other 12 Apr 2016

Skates’n’Stuff will result in a higher assessment 1. Without using a numerical analysis, do you think establishing a subsidiary in Thailand or acquiring Skates’n’Stuff will result in a higher assessment of political risk? Of financial risk? Substantiate your answer. 2. Using a spreadsheet, conduct a quantitative country risk analysis for Blades, Inc., using the information Ben Holt has provided for you. U ...

Other / Other 12 Apr 2016

Kansas thinks this exchange rate is the best forecast 1. Capital Budgeting and Country Risk. Wyoming Co. is a non-profit educational institution that wants to import educational software products from Hong Kong and sell them in the U.S. It wants to assess the net present value of this project since any profits it earns will be used for its Chapter 16: Country Risk Analysis 291 foundation. It expects to pay HK$5 million for the imports. ...

Other / Other 12 Apr 2016

Explain the micro assessment of country 1. Country Risk Analysis. Niagara, Inc., has decided to call a well-known country risk consultant to conduct a country risk analysis in a small country where it plans to develop a large subsidiary. Niagara prefers to hire the consultant since it plans to use its employees for other important corporate functions. The consultant uses a computer program that has assigned weights of importance linked ...

Other / Other 12 Apr 2016

List some forms of political risk other than a takeover of a subsidiary 1. Forms of Country Risk. List some forms of political risk other than a takeover of a subsidiary by the host government, and briefly elaborate on how each factor can affect the risk to the MNC. Identify common financial factors for an MNC to consider when assessing country risk. Briefly elaborate on how each factor can affect the risk to the MNC. 2. Country ...

Other / Other 12 Apr 2016

Explain how the appreciation of the Japanese 1. Exchange Rate Effects on Investing. Explain how the appreciation of the Australian dollar against the U.S. dollar would affect the return to a U.S. firm that invested in an Australian money market security. 2. Exchange Rate Effects on Borrowing. Explain how the appreciation of the Japanese yen against the U.S. dollar would affect the return to a U.S. firm that borrowed Japanese yen and ...

Other / Other 12 Apr 2016