International Financial Management
14th Edition
ISBN: 9780357130698
Author: Madura
Publisher: Cengage
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You are International Business Manager at a UK based company. Your company has identified USA and Europe as
potential markets and wish to expand asap and plans a full-scale expansion. You are requested to analyse both projects
and advise. In considering such large project, you must work out the risk of each project, cost of capital (Hint: you can
use prevailing interest rates and inflation in each region to base your calculation) and calculate NPV. Allocate discount
rate for each project according to current international business climate and justify why you allocated the discount rate
for each region. Discuss how you aim to manage international risks. Projected cash flows in respective currencies: Year
Net Cash Flow - USA USD Net Cash Flow - Europe EUR 0 - 20 million -20 million 1 2 million 2 million 2 4 million 3
million 3 5 million 4 million
46 million 8 million 58 million 8 million Task: a. Briefly discuss viability of both projects in today's global business
context. Based on your…
You are International Business Manager at a UK based company. Considering high demand your company plans a full-scale expansion. Your company has identified USA and Europe as potential markets. You are requested to analyse both projects and advise. In considering such large project, you must work out the risk of each project, cost of capital and NPV. Allocate discount rate for each project accordingly and justify why you allocated this rate in your discussion. Discuss how international risks can be managed.
Projected cash flows in respective currencies:
Year Net Cash Flow – USD USA Net Cash Flow - EUR Europe0 -20 million -20 million 1 2 million 2 million2 4 million 3 million3 5 million 4 million4 6 million 8 million5 8 million 8 million
Instructions:a. Discuss viability of both projects in today’s global business context and allocate discount rate. b. How much investment is needed for each project and what is the NPV of each project? c.…
A company in country X with currency XSD is analyzing a potential investment in country Y with currency YSD. The best estimate is that YSD will be devalued in the international markets at an average of 3%. If the MARR of this company in country X is 23% what is the MARR that the company should use in country Y?
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