Chapter 1, Problem 21QA

A U.S. firm that sells high-quality tennis racquets in the U.S., wants to expand internationally by selling them in Argentina and Brazil. Describe the tradeoffs that are involved for each method (such as exporting, direct foreign investment, etc.) that this firm could use to achieve its goal. Which method of international business in your view would be best suited for this firm? Explain why you recommend so

A US firm does business in Australia.  In attempting to assess its economic exposure, it compiled the following information: Its U.S. sales are somewhat affected by the value of the Australian dollar (AU$), because it faces competition from Australian exporters.  It forecasts the U.S. sales based on the following three exchange rate scenarios:   Revenue from U.S. Business Exchange Rate of AU$ (in millions) AU$ =  $.70 $100 AU$ = $.75 105 AU$ =  $.80 110 Its Australian dollar revenues from sales in Australia invoiced in Australia dollars are expected to be AU$600 million Its anticipated cost of materials is estimated at $200 million from the purchase of U.S. materials and AU$100 million from the purchase of Australia materials Fixed operating expenses are estimated at $30 million Variable operating expenses are estimated at 20% of total sales (after including Australian sales, translated to a dollar amount) Interest expense is estimated at $20 million on existing U.S. loans, and the…

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.

MNC is a U.S. company with the following 1.  Sales to Canada amounting to C$18 million. 2.  Expenses of C$12 million for goods. 3.  Interest expense on Canadian loans of C$2 million.  Given these exact figures above, and no other C$ costs, all else being equal, the dollar value of MNC's earnings should: Group of answer choices increase with an appreciating C$ decrease with an appreciating C$ increase with a depreciating C$ remain unchanged

Which one of these represents the most basic level of international participation by a business entity? Multiple choice question. Operating a single retail store in a singe foreign country Producing a single product in a foreign-built facility Importing and exporting goods and services Operating multiple facilities in various countries to spread risk

Accounting standards and procedures in the United States have a major influence on the translation exposure of U.S.-based MNCs. One such standard is the requirement that MNCs use a weighted average exchange rate when consolidating financial statements from foreign subsidiaries. Suppose that Canton Co. is a U.S.-based MNC with a foreign subsidiary in Germany, which deals in euros. The local earnings of this German subsidiary over a two-year period are shown in the following table, along with the weighted average exchange rate of the euro. For each of the two years, enter the translated earnings for the German subsidiary (in dollars) in the last column of the table. Period Year 1 Year 2 Local Earnings of German Subsidiary (Euros, Millions) 10 10 Weighted Average Exchange Rate of Translated U.S. Dollar Earnings of German Subsidiary Euro (Dollars, Millions) $ $ $1.20 $1.40 Because of a change in the weighted average exchange rate of the euro, the translated earnings of the German…

(6)(a)Identify the revenue and cost related motives for direct foreign investment. (b)Suppose a U.S. based MNC plans to invest in a new plant either in the U.S or in Zambia. The MNC intends to invest 30% of its investment spending in this new plant while the remainder is devoted to the firm's existing structure in the U.S. The characteristics of the proposed new project are given below: If located in U.S If located in Zambia Mean expected annual returns on investment 25% 25% Standard deviation of expected annual returns on investment 0.09 0.11 Correlation of expected annual returns on investment with returns on prevailing U.S business 0.80 -0.05 Determine, with robust quantitative explanation, which location will best provide the firm with a more stable flow of revenue.

Suppose that Salem Co, a U.S.-based MNC that both purchases supplies from Canada and sells exports in Canada, is seeking to measure the economic exposure of its cash flows. Salem wishes to analyze how its cash flows might change under different exchange rates for the Canadian dollar (the only foreign currency in which it deals). Salem believes that the value of the Canadian dollar will be $0.70, $0.75, or $0.80, and seeks to analyze its cash flows under each of these scenarios. The following table shows Salem’s cash flows under each of these exchange rates. Use the table to answer the question that follows.   Exchange Rate Scenario   Exchange Rate Scenario   Exchange Rate Scenario C$1=$0.70 C$1=$0.75 C$1=$0.80 (Millions) (Millions) (Millions) Sales           (1) U.S. Sales $315   $315   $315 (2) Canadian Sales $3.50   $4.00   $4.00 (3) Total Sales in U.S. $ $318.50   $318.75   $319.00 Cost of Materials and Operating Expenses           (4)…

As consultants in advisory services, we are hired by Sayko Corp to help analyze its regional operations in the contiguous U.S. Sayko wishes to draw on our expertise in financial statement analysis to help identify further expansion of operations. Please complete the following with the information on the map (image). 1. Compute profit margin for each region.3. Compute return on total assets for each region.