AGB 302 week 5 case study

Financial Risk Havering Ltd is involved in the manufacture of high technology computer chips and is based in Stockton-on-Tees. It is considered to be one of the UK’s premier high-tech companies and have proved to be exceptionally profitable in the past. You have ascertained the following information about Havering Ltd's activities. It imports most of its raw materials from Japan. Its Japanese supplier insists on prompt payments, in Yen. All other costs are incurred locally and paid for in sterling. The major customers of Havering Ltd are spread throughout the world, although 45% of their revenue originates in Western Europe, where local companies insist on being billed in Euro’s and require 90- day credit terms. A major customer based in Iceland has fallen behind in payment of the amounts it owes to Havering Ltd. Havering Ltd have invested heavily in modern plant, most of which was financed by loans in sterling. Loans are primarily a mixture of floating rate instruments, although there…

From the case study, only respond to question #3

International Finance (chapter 21) Question: Classify each of the following as debits or credits in the U.S. balance of payments. Americans buy chocolate from the Swiss. U.S. gives foreign aid to Bosnia. British   investors purchase U.S. government bonds American tourists travel to Australia Volkswagen earns profits in the United   States from its new cars Toyota   builds a new plant in Ohio Capital   Records sells rock and roll music in Sweden

Considering the following quotes from three banks: London Bank: €1.0837/£ Hong Kong Bank: U$1.1944/£ Tokyo Bank: €0.9582/U$ Ignoring transaction costs, is there an arbitrage opportunity based on these quotes? Justify your answer through calculations. If yes, what steps would you take to make an arbitrage profit and how much profit in US dollars would you make if you are authorized to use 10 million US dollars for this purpose?

Question 1 You have the sole distributor for Lafuma products in Australia (you even got an agreement to prove it). Lately, you noticed that someone is importing the same products in huge quantities from Hong Kong (where it is 40% cheaper) and selling them in Paddy’s, Parklea Market, and other outlets (which are not your retailers) at a substantial discount. Assess the problems that this parallel import has on you. How would this parallel export problem affect Lafuma of France in terms of overall worldwide sales?

Suppose that Nevada Co., a US-based MNC, makes regular, monthly purchases of materials from a German supplier named Spicurity. These regular payments are typically in the amount of 250,000 euros. Last month the exchange rate was $1.44 per euro. Nevada Co. only has cash reserves in dollars, while Spicurity only has cash reserves in euros. Suppose both companies use the same bank. In order to conduct this transaction last month, Nevada Co. required $ transaction reduced Nevada's account by this amount, denominated in dollars and credited it to Spicurity's account. 360,000.00 to pay for the materials. Thus, the bank handling the The bank then converted this amount to M

As the executive of a manufacturing firm that receives supplies from 18 different countries and sells products to 24 countries, your success and failure is determined by exchange rates, which cause frequent fluctuations in the price of supplies and the sale price of manufactured goods. Considering both the pros and cons of currency hedging and strategic hedging, which strategy would you opt for? How would you justify this decision to other executives and to shareholders?

Please help me to solve this problem

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

Any help is appreciated!

HOP Bank is a government-owned bank operating in Country F in Asia. It has over 100 branches and a large customer base. As a government owned bank it has traditionally been the first choice for customers when choosing a bank in Country F. In the last five years, the Government of Country F has permitted a number of foreign banks to operate within the country in order to open up foreign trade and develop its economy. This has been very positive for the economy of Country W. The foreign banks have introduced a range of new products, including online banking and mobile and telephone banking facilities, and are delivering much better levels of customer service than HOP Bank. In contrast, HOP Bank does not offer any form of online banking facility. It does have a website but this can only be used by customers to review the products HOP Bank offers. HOP Bank has very basic information systems, catering only for internal transaction handling and accounting activities. HOP Bank operates an…

People's Bank of China boosts liquidity with open market operations The People's Bank of China, China's central, conducted an open market operation that injected 270 billion yuan into China's banking system. Suppose People's Bank of China buys 20 billion yuan of government securities from ICBC. Show how the transaction changes the balance sheets by filling in the numbers. Source: www.chinadaily.com.cn and finance.yahoo.com, October 8, 2018. In the open market operation described in the news clip, explain whether the People's Bank of China buys or sells People's Bank of China securities. Assets Liabilities (billions of yuan) (billions of yuan) The People's Bank of China securities because Securities Reserves of ICBC A. buys; money is being injected into the banking system ICBC O B. sells; interest rates are falling Assets Liabilities C. buys; an open market operation by definition is a purchase of securities (billions of yuan) (billions of yuan) Securities O D. sells; money is being…

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…

6. Norisol Camacho owns a textile plant in Mexico, but the bulk of her raw materials come from East Texas. In 2012, her costs skyrocketed due changes in the exchange rate between the U.S. dollar and the Mexican peso. Norisol's example provides an illustration of which type of risk? a. Financial Risk b. Liability Risk c. Property Risk d. Price Risk

Give Answer with explanation