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Philips

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A firm based in Mexico has found its growth is restricted by the limited liquidity of the Mexican capital market. List the firm's options for raising money on the global capital market. Discuss the pros and cons of each option, and make a recommendation. How might your recommended options be affected if the Mexican peso depreciates significantly on the foreign exchange market over the next two years?

Read the Management Focus on Philips in China (please see attached) then answer the following questions

a) What are the major benefits to Philips of shifting so much of its global production to China?
b) What are the risks associated with a heavy concentration of manufacturing assets in China?
c) What strategies might Philips adopt to maximize the benefits and mitigate the risks associated with moving so much product development and production activity to developing nations like China?

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A firm based in Mexico has found its growth is restricted by the limited liquidity of the Mexican capital market. List the firm's options for raising money on the global capital market. Discuss the pros and cons of each option, and make a recommendation. How might your recommended options be affected if the Mexican peso depreciates significantly on the foreign exchange market over the next two years?

One of the major options for raising money in the global capital market is debt from foreign institutions, lenders and other debt providers. The firm can raise debt in the foreign market at low rates. The major benefit for such option is that a large amount of money can be raised without diluting equity. However, if Mexican peso depreciates against the currency in which the loan is obtained, the repayment liability can become huge, or in other words, will make the loan feared and unattractive. In order to handle such crisis, the best way is to hedge the foreign debt via use of hedging mechanisms or derivatives available in the foreign exchange market such as exchange rate swaps, futures, options, etc. ...

Solution Summary

What are the major benefits to Philips of shifting so much of its global production to China

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