Chapter 1, Problem 23QA

A U.S.-based MNC has a subsidiary in Malaysia that generates substantial net cash inflows denominated in Ringgit Malaysia. Given this information, the MNC would ____ from a ____ of the Ringgit Malaysia. A. benefit; appreciation B. not benefit; depreciation C. benefit; depreciation D. not benefit; appreciation

Consider Hurd Co., a U.S.-based MNC that wishes to analyze its economic exposure with respect to the British pound. The firm is comprised of three major business units: Unit A, Unit B, and Unit C. Each unit conducts international transactions in pounds. Hurd gathers data on percentage changes in the cash flow of each unit, changes in the total cash flow of the company, as well as the change in the value of the pound over the last 12 quarters. A small subset of the data set is shown in the following table, with many of the observations omitted for brevity. % Change in Unit % Change in Unit % Change in Unit % Change in Total % Change in Quarter A's Cash Flows B's Cash Flows C's Cash Flows Cash Flows Value of Pound 1 -2 1 3 2 1 2 -1 0 2 1 4 12 3 0 1 4 -3 Hurd uses the data to estimate the following regression equation. PCF₁ = ao + a₁ (PCP₁) +µt Where PCF is the percentage change in the cash flows of the company at time period t (column 5 in the table), and PCP, is the percentage change in…

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 estimates it's cash flows from both the U.S., in dollars, and Canada, in Canadian dollars. These figures are summarized in the following table. U.S. Canada Sales -Cost of materials $315 C$5 $45 C$150 -Operating expenses $55 -Interest expenses $5 C$10 Cash flows $210 -$C155 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. For each exchange rate scenario, fill in rows (2), (3), (5), (6), (9), and (10). Finally, fill in the last row for net cash flows in U.S. dollars for each…