Archives: Solution Manual
978-1337269964 Chapter 21 Solution Manual Part 3
ANSWER: a. You should be concerned about your exposure, because you can not assume that the inflation rate c. The demand for your business would likely be affected if you shift the invoice policy. If the peso weakens, your clients […]
978-1337269964 Chapter 21 Solution Manual Part 2
Currency Spot Exchange Rate Forecasted Annual Percentage Change in Exchange Rates Australian dollar $.70 –4% Canadian dollar .80 –2 New Zealand dollar .60 +3 Japanese yen .008 0 1. Determine the investment portfolio composition for Kent’s eastern branch that would […]
978-1337269964 Chapter 21 Solution Manual Part 1
Topics to Stimulate Class Discussion 1. Should international cash management be conducted at the subsidiary level or at the centralized level? Elaborate. 2. What is the use of netting to an MNC? 3. How can a firm deal with blocked […]
978-1337269964 Chapter 21 Lecture Notes
Chapter 21 International Cash Management Lecture Outline Multinational Working Capital Management Subsidiary Expenses Subsidiary Revenue Subsidiary Dividend Payments Subsidiary Liquidity Management Centralized Cash Management Accommodating Cash Shortages Optimizing Cash Flows Accelerating Cash Inflows Minimizing Currency Conversion Costs Managing Blocked Funds […]
978-1337269964 Chapter 20 Solution Manual
Topics to Stimulate Class Discussion 1. If a firm consistently exports to a country with low interest rates and needs to consistently borrow funds, explain how it could coordinate its invoicing and financing to reduce its financing costs. 2. What […]
978-1337269964 Chapter 20 Lecture Notes
Chapter 20 Short-Term Financing Lecture Outline Sources of Foreign Financing Internal Short-term Financing External Short-term Financing Access to Funding During a Credit Crisis Financing with a Foreign Currency Motivation for Financing with a Foreign Currency Potential Cost Savings from Financing […]
978-1337269964 Chapter 2 Solution Manual
POINT/COUNTER-POINT: Should Trade Restrictions be Used to Influence Human Rights Issues? POINT: Yes. Some countries do not protect human rights in the same manner as the U.S. At times, the U.S. should threaten to restrict U.S. imports from or investment […]
978-1337269964 Chapter 2 Lecture Notes
Chapter 2 International Flow of Funds Lecture Outline Balance of Payments Current Account Financial Account Capital Account Growth in International Trade Events That Increased Trade Volume Impact of Outsourcing on Trade Trade Volume Among Countries Trend in U.S.Balance of Trade […]
978-1337269964 Chapter 19 Solution Manual
Topics to Stimulate Class Discussion 1. Assume that you receive a call from an old friend who has set up a computer parts store. He says that he plans to begin exporting these parts soon. What potential complications should he […]
978-1337269964 Chapter 19 Lecture Notes
Chapter 19 Financing International Trade Lecture Outline Payment Methods for International Trade Prepayment Letters of Credit Drafts Consignment Open Account Impact of the Credit Crisis on Payment Methods Trade Finance Methods Accounts Receivable Financing Factoring Letters of Credit Banker’s Acceptances […]
978-1337269964 Chapter 18 Solution Manual Part 2
Solution to Continuing Case Problem: Blades, Inc. 1. Given that Blades expects to use the cash flows generated by the Thai subsidiary to pay the interest and principal of the notes, would the effective financing cost of the baht-denominated notes […]
978-1337269964 Chapter 18 Solution Manual Part 1
Topics to Stimulate Class Discussion 1. Why would U.S. firms consider issuing bonds denominated in a foreign currency? 2. What are the desirable characteristics related to a currency’s interest rate (high or low) and value (strong or weak) that would […]
978-1337269964 Chapter 18 Lecture Notes
Chapter 18 Long-Term Debt Financing Lecture Outline Debt Denomination Decision of Foreign Subsidiaries Foreign Subsidiary Borrows Its Local Currency Foreign Subsidiary Borrows Dollars Debt Denomination Analysis: A Case Study Identifying Debt Denomination Alternatives Analyzing Debt Denomination Alternatives Estimating the Cost […]
978-1337269964 Chapter 17 Solution Manual Part 2
23. Financing with Foreign Equity. Orlando Co. has its U.S. business funded in dollars with a capital structure of 60% debt and 40% equity. It has its Thailand business funded in Thai baht with a capital structure of 50% debt […]
978-1337269964 Chapter 17 Solution Manual Part 1
POINT/COUNTER-POINT: Should the Reduced Tax Rate on Dividends Affect an MNC’s Capital Structure? POINT: No. The change in the tax law reduces the taxes that investors pay on dividends. It does not change the taxes paid by the MNC. Thus, […]
978-1337269964 Chapter 17 Lecture Notes
Chapter 17 Multinational Cost of Capital and Capital Structure Lecture Outline Components of Capital Retained Earnings Sources of Debt External Sources of Equity The MNC’s Capital Structure Decision Influence of Corporate Characteristics Influence of Host Country Characteristics Response to Changing […]
978-1337269964 Chapter 16 Solution Manual Part 2
20. How Country Risk Affects NPV. In the previous question, assume that instead of adjusting the estimated cash flows of the project, Monk had decided to adjust the discount rate from 12 percent to 17 percent. Reevaluate the NPV of […]
978-1337269964 Chapter 16 Solution Manual Part 1
Topics to Stimulate Class Discussion 1. How would you rate the country risk of the U.S.? Would your rating change if you lived in a foreign country? Why? 2. Some people say that you cannot separate the political and financial […]
978-1337269964 Chapter 16 Lecture Notes
Chapter 16 Country Risk Analysis Lecture Outline Country Risk Characteristics Political Risk Characteristics Financial Risk Characterisitcs Measuring Country Risk Techniques to Assess Country Risk Deriving a Country Risk Rating Incorporating Country Risk in Capital Budgeting Adjustment of the Discount Rate […]
978-1337269964 Chapter 15 Solution Manual Part 2
23. Impact of Country Perspective on Target Valuation. Targ Co. of the U.S. has been targeted by 3 firms that consider acquiring it: (1) Americo (from the U.S.), Japino (of Japan), and Canzo (of Canada). These 3 firms do not […]
978-1337269964 Chapter 15 Solution Manual Part 1
International Corporate Governance and Control 1 POINT/COUNTER-POINT: Can a Foreign Target Be Assessed Like Any Other Asset? POINT: Yes. The value of a foreign target to an MNC is the present value of the future cash flows to the […]
978-1337269964 Chapter 15 Lecture Notes
Chapter 15 International Corporate Governance and Control Lecture Outline International Corporate Governance Governance by Board Members Governance by Institutional Investors Governance by Shareholder Activists International Corporate Control Motives for International Acquisitions Trends in International Acquisitions Barriers to International Corporate Control […]
978-1337269964 Chapter 14 Solution Manual Part 3
Multinational Capital Budgeting 1 ANSWER: (See spreadsheet attached.) The spreadsheet shows that an annual depreciation of 5 percent of the Thai baht will result in a positive NPV of $5,620,315. Since this is a worst case scenario, Blades should […]
978-1337269964 Chapter 14 Solution Manual Part 2
ANSWER: It should hedge the minimum amount of revenue. If it hedges the minimum, the NPV for either scenario is higher than if it had hedged the maximum amount of revenue. f. Blustream recognizes that it is exposed to exchange […]
978-1337269964 Chapter 14 Solution Manual Part 1
POINT/COUNTER-POINT Should MNCs Use Forward Rates to Estimate Dollar Cash Flows of Foreign Projects? POINT: Yes. An MNC’s parent should use the forward rate for each year in which it will receive net cash flows in a foreign currency. The […]
978-1337269964 Chapter 14 Lecture Notes
Chapter 14 Multinational Capital Budgeting Lecture Outline Subsidiary versus Parent Perspective Tax Differentials Restrictions on Remitted Earnings Exchange Rate Movements Summary of Factors That Distinguish the Parent Perspective Input for Multinational Capital Budgeting Multinational Capital Budgeting Example Background Analysis Other […]
978-1337269964 Chapter 13 Solution Manual
POINT/COUNTER-POINT: Should MNCs Avoid DFI in Countries without Child Labor Laws? POINT: Yes. An MNC should maintain its hiring standards, regardless of what country it is in. Even if a foreign country allows children to work, an MNC should not […]
978-1337269964 Chapter 13 Lecture Notes
Chapter 13 Direct Foreign Investment Lecture Outline Motives for Direct Foreign Investment (DFI) Revenue-Related Motives Cost-Related Motives Comparing Benefits of DFI Among Countries Measuring an MNC’s Benefits of DFI Benefits of International Diversification Diversification Analysis of International Projects Diversification Among […]
978-1337269964 Chapter 12 Solution Manual Part 2
Solution to Supplemental Case: Madison Co. a. While economic exposure adversely affected the firm’s performance in a recent period, it should favorably affect the firm’s performance in the future. A weak Canadian dollar (which has been forecasted) would favorably affect […]
978-1337269964 Chapter 12 Solution Manual Part 1
POINT/COUNTER-POINT: Can an MNC Reduce the Impact of Translation Exposure by Communicating? POINT: Yes. Investors commonly use earnings to derive an MNC’s expected future cash flows. Investors do not necessarily recognize how an MNC’s translation exposure could distort their estimates […]
978-1337269964 Chapter 12 Lecture Notes
Chapter 12 Managing Economic Exposure and Translation Exposure Lecture Outline Managing Economic Exposure Assessing Economic Exposure Restructuring to Reduce Economic Exposure Limitations of Restructuring Intended to Reduce Economic Exposure A Case Study on Hedging Economic Exposure Savor Co.’s Assessment of […]
978-1337269964 Chapter 11 Solution Manual Part 4
Strategy (2) – It can establish a hedge TODAY for ALL future receivables (a one-year forward hedge for receivables in one year, a two-year forward hedge for receivables in two years, and so on). a. Assume that the euro depreciates […]
978-1337269964 Chapter 11 Solution Manual Part 3
Your firm in the U.S. expects to need 1 million pounds in one year to pay for imports. You can use any one of the following strategies to deal with the exchange rate risk: a. unhedged strategy b. money market […]
978-1337269964 Chapter 11 Solution Manual Part 2
29. The Long-term Hedge Dilemma. St. Louis Inc., which relies on exporting, denominates its exports in pesos and receives pesos every month. It expects the peso to weaken over time. St. Louis recognizes the limitation of monthly hedging. It also […]
978-1337269964 Chapter 11 Solution Manual Part 1
POINT/COUNTER-POINT: Should an MNC Risk Overhedging? POINT: Yes. MNCs have some “unanticipated” transactions that occur without any advance notice. They should attempt to forecast the net cash flows in each currency due to unanticipated transactions based on the previous net […]
978-1337269964 Chapter 11 Lecture Notes
Chapter 11 managing Transaction Exposure Lecture Outline Policies for Hedging Transaction Exposure Hedging Most of the Exposure Selective Hedging Hedging Exposure to Payables Forward or Futures Hedge on Payables Money Market Hedge on Payables Call Option Hedge on Payables Comparison […]
978-1337269964 Chapter 10 Solution Manual Part 1
POINT/COUNTER-POINT: Should Investors Care about an MNC’s Translation Exposure? POINT: No. The present value of an MNC’s cash flows is based on the cash flows that the parent receives. Any impact of the exchange rates on the financial statements is […]
978-1337269964 Chapter 10 Lecture Notes
Chapter 10 Measuring Exposure to Exchange Rate Fluctuations Lecture Outline Relevance of Exchange Rate Risk Transaction Exposure Estimating “Net” Cash Flows in Each Currency Transaction Exposure of an MNC’s Portfolio Transaction Exposure Based on Vale-at-Risk Economic Exposure Economic Exposure to […]
978-1337269964 Chapter 1 Solution Manual Part 2
23. Valuation of an MNC. Yahoo! has expanded its business by establishing portals in numerous countries, including Argentina, Australia, China, Germany, Ireland, Japan, and the U.K. It has cash outflows associated with the creation and administration of each portal. It […]
978-1337269964 Chapter 1 Solution Manual Part 1
POINT/COUNTER-POINT: Should an MNC Reduce Its Ethical Standards to Compete Internationally? POINT: Yes. When a U.S.-based MNC competes in some countries, it may encounter some business norms there that are not allowed in the U.S. For example, when competing for […]
978-1337269964 Chapter 1 Lecture Notes
Chapter 1 Multinational Financial Management: An Overview Lecture Outline Managing the MNC How Business Disciplines Are Used to Manage the MNC Agency Problems Management Structure of an MNC Why Firms Pursue International Business Theory of Comparative Advantage Imperfect Markets Theory […]
978-1337127363 Chapter 9 Solution Manual Part 2
9.6 a. We have 1 . 1 k 11 1 q1 MP = = + k l k k = qk q = k […]
978-1337127363 Chapter 9 Solution Manual Part 1
Because the problems in this chapter do not involve optimization (cost minimization principles are not presented until Chapter 10) they tend to have a rather uninteresting focus on functional form. Computation of marginal and average productivity functions is stressed along […]
978-1337127363 Chapter 8 Solution Manual Part 2
8.6 a. Using the underlining algorithm or other method, one can verify that b. Cooperation on silent is best sustained using grim strategies as described in the text. In this cooperative equilibrium, each player earns present discounted value of 1 […]
978-1337127363 Chapter 8 Solution Manual Part 1
These problems cover a variety of different concepts introduced in the chapter. They range in difficulty from the simplest exercise of finding the Nash equilibrium in a two-by-two matrix to characterizing equilibrium when players have continuous actions and payoffs with […]
978-1337127363 Chapter 7 Solution Manual Part 2
7.10 a. As before, 1 ( ) 1 2.EO But now 1 2 0 ( ) 2 1E O xdx and 13 1 12 0 1 3 13 21 2 13 0 max , […]
978-1337127363 Chapter 7 Solution Manual Part 1
Most of the problems in this chapter focus on illustrating the concept of risk aversion. They assume that individuals have concave utility of wealth functions and therefore dislike variance in their wealth. For some of these problems (especially the later […]
978-1337127363 Chapter 6 Solution Manual Part 2
45 6.11 Graphing complements a,b. The figure shows that the loss in 1 x can be compensated for by an additional j of 3 x or k of 2.x c. The new indifference curve is given by 2.U U( 0 […]
978-1337127363 Chapter 6 Solution Manual Part 1
Two types of demand relationships are stressed in the problems to Chapter 6: cross-price effects and composite commodity results. The general goal of these problems is to illustrate how the demand for one particular good is affected by economic changes […]
978-1337127363 Chapter 5 Solution Manual
35 Problems in this chapter focus on comparative statics analyses of income and own-price changes. Many of the problems are fairly easy so that students can approach the ideas involved in shifting budget constraints in simplified settings. Theoretical material is […]