Details: Your boss wants to send a brief email message welcoming employees recently transferred to your department from your Hong Kong branch. They all speak English, but your boss asks you to review his message for clarity. What would you suggest your boss change in the following email message, and why? Would you consider this
Adapted from Fundamentals of Futures and Options Markets, 6th ed., John C. Hull. Chapter 1 AD 1: Consider the situation described in Example 1.1 on page 11. This example provides a description of hedging a foreign currency exposure with forward contracts. Q1. Consider the initial unhedged position. If the £ strengthens
Question 1 Phildell Phoenix is paid on a monthly basis. For the month of January of the current year, he earned a total of $8,288. FICA tax for social security is 6.2% and the FICA tax for Medicare is 1.45%. The FUTA tax rate is 0.8%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of
Interest rate parity: Six-month T-bills have a nominal rate of 7 percent, while default-free Japanese bonds that mature in 6 months have a nominal rate of 5.5 percent. In the spot exchange market, 1 yen equals $0.009. If interest rate parity holds, what is the 6-month forward exchange rate? Exchange rates below lists forei
Need to understand the difference between Absolute and Relative PPP. Also how important are these theories for international business?
Question 11 A company had beginning retained earnings $63,100. During the year, the company reported sales $127,800, costs of goods sold $89,900, depreciation $11,200, dividends $28,000, and interest expenses $3,400. The tax rate is 35%. What is the retained earnings balance at the end of the year? a. $50,245 b.
Can you help me get started on this assignment? There are four direct general economic indices that are used to forecast the sales of the PEPT (Portable Electric Power Tools) Industry in which Able Corporation operates. These are housing starts, expenditures for residential construction, expenditures for commercial constructi
I need help with these 10 questions. Thanks. Choose the best answer. 1. You live in the U.S. and want to invest in a Japanese company because you believe its stock is uniquely positioned to be unusually profitable over the next 2 years. However, you do not have access to the Japanese financial markets. You could still inv
S&S AIR GOES INTERNATIONAL Mark Sexton and Todd Story, the owners of S&S Air, have been in discussions with an aircraft dealer in Europe about selling the company's Eagle airplane. The Eagle sells for $78,000 and has a variable cost of $60,000 per airplane. Amalie Diefenbaker, the dealer, wants to add the Eagle to her current r
What is meant by foreign exchange risk? What specific problems does foreign exchange present in an organization? How could an organization needing Euros in six months protect itself from currency fluctuations?
1. Briefly explain how the exchange rate risk affects the capital budgeting decisions of multinational companies. 2. Briefly explain how the political risk affects the capital budgeting decisions of multinational companies. 3. Briefly explain how the tax law differences affect the capital budgeting decisions of multina
Fred is planning on taking a wine-tasting tour through Italy this summer. The tour will cost 2,750 Euros and includes transportation, hotels, and a guide. Fred estimates that round-trip air fare from his home in North Carolina to Rome, Italy, will be $1,490; he will also incur another $300 (U.S.) in incidental travel expenses. F
Exchange rates for several countries are shown below. The MLC Company which is based in the U.S. does business with companies in those countries. The rates are shown as direct or indirect from the standpoint of the U.S. Company. U.S. Dollar / Japanese yen (Indirect) British Pound / U.S. Dollar (Direct) U.S.
1. Simon Manufacturing Co. is planning to acquire Garfunkel Engineering in a two-step buyout. Garfunkel has 3,000,000 shares of common stock currently outstanding, and the market price is currently at $25 per share. The first step of the buyout would offer to purchase 51% of Garfunkel Engineering common stock for $34 per share,
A currency trader observes that in the spot exchange market, 1 U.S. dollar can be exchanged for 9 Mexican pesos or for 111.23 Japanese yen. What is the cross rate between the yen and the peso; that is, how many yen would you receive for every peso exchanged?
Fisher Effect: Exchange Rates for US Dollar and Jananese Yen Examine the exchange rate of the U.S. dollar to the Japanese yen in January 2005 versus January 2006. Compute the appreciation or depreciation of the U.S. dollar relative to the Japanese yen. Check the U.S. inflation rate for 2005 and apply the Fisher effect formula. Check the average annual inflation rate in Japan for the same time period. Does it support the answer obtained using the Fisher effect? Why or why not?
Examine the exchange rate of the U.S. dollar to the Japanese yen in January 2005 versus January 2006. Compute the appreciation or depreciation of the U.S. dollar relative to the Japanese yen. Check the U.S. inflation rate for 2005 and apply the Fisher effect formula. Check the average annual inflation rate in Japan for the same
It is said that derivatives are both a risk management tool for management to hedge risk as well as a speculative device that destabilizes prices, misallocates resources, and bankrupts many companies and government. Can the derivatives be viewed as an investment instrument? Explain your answer with relevant examples and clea
Choose three companies from different industries and locate their statements of cash flows for the most recent year. Create a table to compare the dollars provided or used by operating, investing, and financing activities, as well as the overall increase or decrease in cash.
Assume the following spot and forward rates for the New Zealand dollar ($/NZD). Spot rate $.6317 30 day forward rate $.6330 60 day forward rate $.6353 90 day forward rate $.6387 (a) What is the U.S. dollar value of one New Zealand dollar in the spot market? (b) Suppose you issued a 90-day
For your job as the business reporter for a local newspaper, you are given the assignment of putting together a series of articles on the multinational finance and the international currency markets for your readers. Much recent local press coverage has been given to losses in the foreign exchange markets by JGAR, a local firm t
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, a
Six-month t-bills have a nominal rate of 7 percent, while default-free Japanese bonds that mature in 6 months have a nominal rate of 5.5 percent. In the spot exchange market, 1 Yen equals $0.009. If interest parity holds, what is the 6-month forward exchange rate? Please show calculations.
If British pounds sell for 1.50 (U.S.) per pound, what should dollars sell for in pounds per dollar? Please show calculations.
Please describe the primary functions of the foreign exchange market. How do global companies use the foreign exchange market to hedge against foreign exchange risks? Answer should be in narrative form integrating business and risk assessment tools and concepts into professional life. Use examples to suport answer with 1-1.5
1. Consider a bank that acknowledges that it will make payments on behalf of a beer importer after the beer is delivered to the importer. This reflects: A) accounts receivable financing. B) Forfeiting C) Factoring D) a letter of credit 2. Which of the following payment terms provides the supplier with the greatest degre
What are the purposes of the foreign exchange market? Also, how is the FOREX used to raise capital by international businesses?
6-18; Intervention Effects on Corporate Performance. Assume you have a subsidiary in Australia. The Subsidiary sells mobile homes to local consumers in Australia, who buy the homes using mostly borrowed funds from the local banks. Your subsidiary purchases all of its materials from Hong Kong. The Hong Kong dollar is tied to the
DFI Strategy. J.C. Penney has recognized numerous opportunities to expand in foreign countries and has assessed many foreign countries and has assessed many foreign markets,
13-15; DFI Strategy. J.C. Penney has recognized numerous opportunities to expand in foreign countries and has assessed many foreign countries and has assessed many foreign markets, including Brazil, Greece, Mexico, Portugal, Singapore, and Thailand. It has opened new stores in Europe, Asia, and Latin America. In each case, the
Question 11 - From a trade basis, if U.S. trade deficits with Japan continues, and if U.S. inflation rates exceed that of Japan, A- the yen is likely to appreciate against the dollar moving from 110 yen per dollar to 120 yen per dollar. B- the yen is likely to appreciate against the dollar moving from 120 ye
The forecasted exchange rate for euros to U.S. dollars is between 0.40 to 1.20 (which is 0.40 euros/US$1 to 1.20 euros/US$1), and the current exchange rate is 1 euro for US$1. You decide to use these two extreme points to analyze how European revenue would translate to U.S. dollars over the 5-year time period.
Year 1 sales = 110 million euros Year 2 sales = 130 million euros Year 3 sales = 150 million euros Year 4 sales = 175 million euros Year 5 sales = 190 million euros The forecasted exchange rate for euros to U.S. dollars is between 0.40 to 1.20 (which is 0.40 euros/US$1 to 1.20 euros/US$1), and the current exchange rat