Multinational financial management
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Company A is a multinational company that has headquarters in the U.S. They have to buy raw materials in several different countries which involves different currencies. It also sells its products in other foreign countries. A radio transmitter that the company sells draws its principle components, Component X, Component Y, and Component Z, from Switzerland, France, and England, respectively. Specifically, Component X costs 165 Swiss francs, Component Y costs 20 euros,and Component Z costs 105 British pounds. The largest market for the transmitter is in Japan, where it sells for 38,000 Japanese Yen. Given this information calculate the following;
1) How much, in dollars, does it cost for the company to produce the transmitter? What is the dollar sale price of the transmitter?
2) What is the dollar profit that the company makes on the of the transmitter? What is the percentage profit?
3) If the U.S. dollar were to weaken by 10 percent against all foreign currencies (6 in all), what would be the dollar profit for the transmitter?
4) If the U.S. dollar were to weaken by 10 percent only against the Japanese yen and remained constant relative to all other foreign currencies, what would be the dollar and percentage profits for the transmitter?
5) See the following information for the last part of the question;
Spot Rate 180 days Disc/Prem
British pound 0.5724 0.5740 Discount
Canadian dollar 1.2186 1.2120 Premium
Japanese yen 111.43 109.28 Prem
Swiss franc 1.2945 1.2740 Prem
Calculate the return on 1-year securities in Switzerland, if the rate of return on 1-year securities in the U.S. is 4.9 percent.
Please show calculations.
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