Billabong Fashion is based in Melbourne, Australia. Billabong Fashion has a subsidiary in Shanghai that generates RMB85 million in annual sales. Any earnings generated by the subsidiary are reinvested to support its operations. Belle Fashion is the close competitor of Billabong Fashion. Belle Fashion is a local Australian company located in Japan with annual export sale to Malaysia of about MYR 45 million. Based on the information provided, which firm is subject to a higher degree of translation exposure? Justify your answer with thorough explanation on both companies.
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- Billabong Fashion is based in Melbourne, Australia. Billabong Fashion has a subsidiary in Shanghai that generates RMB85 million in annual sales. Any earnings generated by the subsidiary are reinvested to support its operations. Belle Fashion is the close competitor of Billabong Fashion. Belle Fashion is a local Australian company located in Japan with annual export sale to Malaysia of about MYR 45 million. Based on the information provided, which firm is subject to a higher degree of translation exposure? Justify your answer with thorough explanation on both companies.
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- ABC Inc. is a U.S. firm with annual export sales to Canada of about C$500 million. Its main competitor is XYZ Inc., also based in the United States, with a subsidiary in Canada that generates about C$500 million in annual sales. Any earnings generated by the subsidiary are reinvested to support its operations. Based on the information provided, which company is subject to a higher degree of translation exposure? Explain.ABC Inc. produces home appliances and sells them in the U.S. It outsources the production of the appliances to a Vietnamese manufacturer, and the imported appliances are priced in dollars. Its major competitor for appliances is located in China. Based on this information, ABC Inc. is subject to ____ exposure. A. economic B. translation C. economic and transaction D. transactionDianthus Ltd is a multinational company with headquarters in Queensland, Australia. It is, however, listed on both ASX (Australian Securities Exchange) and TWSE (Taiwan Stock Exchange). It manufactures and sells cardboard boxes worldwide. Most of its products are manufactured in Taiwan, where it obtains local materials and labour. Its sales are invoiced in Australian dollars. Some other information about the company is displayed below. Sales breakdown by geographical segments 2020 2019 Sales in Australia 2.1 billion AUD 2.2 billion AUD Sales in Taiwan 2.51 billion TWD 2.04 billion TWD Sales to the rest of the world 0.5 billion AUD 0.4 billion AUD Value of listings on securities / stock exchanges ASX TWSE Number of shares 1,000,000 2,000,000,000 Price per share 510 AUD 2.4 TWD The company issues all of its bonds to both retail and institutional investors in Australia, currently worth AUD 215 million in the market. In the tables above, AUD refers to Australian dollars, whereas TWD refers…
- Babylon Co. is a Japanese firm. It has a subsidiary in China that produces computer chips and sells them to European countries. The chips are invoiced in Japanese Yen. The subsidiary pays wages, rent, and other operating costs in China's currency (Yuan). Every month, the subsidiary remits a large amount of earnings to the Japanese parent. This is the only international business that Babylon Co. has. The subsidiary wants to borrow funds to expand its facilities, and can borrow Japanese Yen at 9 percent annually or borrow Chinese Yuan at 9 percent annually. Which currency should the parent tell the subsidiary to borrow, if the parent's main goal is to minimize exchange rate risk? Explain.Lalua Co is a US firm has planning to export its products to Singapore since its decision to supplement its declining U.S. sales by exporting there. Furthermore, Lalua Co. also has recently begun exporting to a retailer in United Kingdom. Below are the details of transactions for Lalua Co. through out of the year: - i. Blades has forecasted sales in the United States of 520,000 pairs of Speedos at regular prices which is $115; exports to Singapore of 180,000 pairs of speedos for SGD25 a pair; and exports to the United Kingdom of 200,000 pairs of Speedos for £80 per pair. ii. Cost of goods sold for 800,000 pairs of speedos are incurred in Singapore with the price of SGD 15; the remainder is incurred in the United States, where the cost of goods sold per pair of Speedos runsapproximately $70. iii. Fixed cost are $2 million and variable operating expenses other than costs of goods sold represent approximately 12 percent of U.S. sales. All fixed and variable operating expenses other than…a) Mashimoto Electric is based in Osaka, Japan. Mashimoto Electric has a subsidiary inSingapore that generates SGD 50 million in annual sales. Any earnings generated by thesubsidiary are reinvested to support its operations. Benzai Electric is the close competitor ofMashimoto Electric. Benzai Electric is a local Japanese company located in Japan with 2 annual export sale to Singapore of about SGD 50 million. Based on the informationprovided, which firm is subject to a higher degree of translation exposure? Justify youranswer with thorough explanation on both companies.b) Diamond Limited, a New Zealand company has an Australian subsidiary that earnedAUD40 million this year. Little Limited, which is also resided in New Zealand has anAustralian subsidiary that earned AUD30 million this year. The subsidiary of DiamondLimited plans to reinvest its earnings in Australia while the subsidiary of Little Limitedplans to remit its earnings to the New Zealand parent. Another New Zealand…
- New Life is a multinational distribution company that started operating a Branch in Barbados on 1 January 2023. The company’s Head Office is in the Cayman Islands and is part of a group which earns more than USD 850 million for the year. It employed some of its staff from Barbados and imports good and services from the US, Cayman Islands, and other Caribbean countries. New Life repatriation policy is to transfer 50 % to 70% of its after-tax profits to the Cayman Islands. The company was of the view that for the first year of operation there was a window of no tax obligations. In December 2023, the company realized that their understanding was not correct and therefore engaged UWI Tax Consulting Services Limited to provide tax advisory and tax compliance services. Your Group was assigned this engagement. Required.Advice New Life of the tax matters that needs to be considered when operating in Barbadosincluding any tax benefits or incentives they may consider.New Life is a multinational distribution company that started operating a Branch in Barbados on1 January 2023. The company’s Head Office is in the Cayman Islands and is part of a group whichearns more than USD 850 million for the year. It employed some of its staff from Barbados and imports good and services from the US, Cayman Islands, and other Caribbean countries. New Life repatriation policy is to transfer 50 % to 70% of its after-tax profits to the Cayman Islands.The company was of the view that for the first year of operation there was a window of no taxobligations. In December 2023, the company realized that their understanding was not correct and therefore engaged UWI Tax Consulting Services Limited to provide tax advisory and tax compliance services. Your Group was assigned this engagement. Required.Advice New Life of the tax matters that needs to be considered when operating in Barbadosincluding any tax benefits or incentives they may consider.Please answer both subparts. 1. XYZ, an Australian exporter, has entered into a contract to sell goods in 6 months time and will receive USD 1 million for these goods. What type of exposure is this an example of and why? (a) Economic exposure (b) Translation exposure (c) Transaction exposure (d) Competitive exposure 2. How can a firm protect itself against economic exposure? (a) Money market hedges (b) Geographical diversification (c) Forward contract hedges (d) Futures market hedging
- Spartan Corporation manufactures quidgets at its plant in Sparta, Michigan. Spartan sells its quidgets to customers in the United States, Canada, England, and Australia. Spartan markets its products in Canada and England through branches in Toronto and London, respectively. Spartan reported total gross income on U.S. sales of $35,100,000 and total gross income on Canadian and U.K. sales of $7,800,000, split equally between the two countries. Spartan paid Canadian income taxes of $936,000 on its branch profits in Canada and U.K. income taxes of $1,092,000 on its branch profits in the United Kingdom. Spartan financed its Canadian operations through a $9 million capital contribution, which Spartan financed through a loan from Bank of America. During the current year, Spartan paid $540,000 in interest on the loan. Spartan sells its quidgets to Australian customers through its wholly owned Australian subsidiary. Spartan reported gross income of $2,240,000 on sales to its subsidiary during…Spartan Corporation manufactures quidgets at its plant in Sparta, Michigan. Spartan sells its quidgets to customers in the United States, Canada, England, and Australia. Spartan markets its products in Canada and England through branches in Toronto and London, respectively. Spartan reported total gross income on U.S. sales of $35,100,000 and total gross income on Canadian and U.K. sales of $7,800,000, split equally between the two countries. Spartan paid Canadian income taxes of $936,000 on its branch profits in Canada and U.K. income taxes of $1,092,000 on its branch profits in the United Kingdom. Spartan financed its Canadian operations through a $9 million capital contribution, which Spartan financed through a loan from Bank of America. During the current year, Spartan paid $540,000 in interest on the loan. Spartan sells its quidgets to Australian customers through its wholly owned Australian subsidiary. Spartan reported gross income of $2,240,000 on sales to its subsidiary during…Mama Mia Inc and Wonderful Inc are European-based companies with subsidiaries located in Kuala Lumpur. Both companies distribute chemical supplies (produced in Europe) to customers throughout Asia. Both subsidiaries purchase the products at cost and sell the products at 90 percent markup. The other operating costs of the subsidiaries are very low. Mama Mia Inc has a research and development centre in Europe that focuses on improving its medical technology. Wonderful Inc. has a similar centre based in Kuala Lumpur. The parent of each firm subsidizes its respective research and development centre on an annual basis. Which company is subject to a higher degree of economic exposure? Justify your answer with thorough explanation on both companies.