) Mashimoto Electric is based in Osaka, Japan. Mashimoto Electric has a subsidiary in Singapore that generates SGD 50 million in annual sales. Any earnings generated by the subsidiary are reinvested to support its operations. Benzai Electric is the close competitor of Mashimoto Electric. Benzai Electric is a local Japanese company located in Japan with 2 annual export sale to Singapore of about SGD 50 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. b) Diamond Limited, a New Zealand company has an Australian subsidiary that earned AUD40 million this year. Little Limited, which is also resided in New Zealand has an Australian subsidiary that earned AUD30 million this year. The subsidiary of Diamond Limited plans to reinvest its earnings in Australia while the subsidiary of Little Limited plans to remit its earnings to the New Zealand parent. Another New Zealand company, Malee Limited does not have an Australian subsidiary but it received revenue of AUD50 million this year from exporting to Australia. All three companies have the same total revenue and total earnings levels (when considering their New Zealand business as well), and are the same size, and do not have any other international business. Which company is subject to the highest degree of translation exposure? Justify your answer with thorough explanation on both companies. c) Medi Darussalam and Sihat Begawan are Brunei-based companies with subsidiaries located in Singapore. Both companies distribute medical supplies (produced in Brunei) to customers throughout South East Asia. Both subsidiaries purchase the products at cost and sell the products at 90 percent markup. The other operating costs of the subsidiaries are very low. Medi Darussalam has a research and development center in Brunei that focuses on improving its medical technology. Sihat Begawan has a similar center based in Singapore. The parent of each firm subsidizes its respective research and development center on an annual basis. Which company is subject to a higher degree of economic exposure? Justify your answer with thorough explanation on both companies.
a) Mashimoto Electric is based in Osaka, Japan. Mashimoto Electric has a subsidiary in
Singapore that generates SGD 50 million in annual sales. Any earnings generated by the
subsidiary are reinvested to support its operations. Benzai Electric is the close competitor of
Mashimoto Electric. Benzai Electric is a local Japanese company located in Japan with
2 annual export sale to Singapore of about SGD 50 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.
b) Diamond Limited, a New Zealand company has an Australian subsidiary that earned
AUD40 million this year. Little Limited, which is also resided in New Zealand has an
Australian subsidiary that earned AUD30 million this year. The subsidiary of Diamond
Limited plans to reinvest its earnings in Australia while the subsidiary of Little Limited
plans to remit its earnings to the New Zealand parent. Another New Zealand company,
Malee Limited does not have an Australian subsidiary but it received revenue of AUD50
million this year from exporting to Australia. All three companies have the same total
revenue and total earnings levels (when considering their New Zealand business as well),
and are the same size, and do not have any other international business. Which company
is subject to the highest degree of translation exposure? Justify your answer with thorough
explanation on both companies.
c) Medi Darussalam and Sihat Begawan are Brunei-based companies with subsidiaries
located in Singapore. Both companies distribute medical supplies (produced in Brunei) to
customers throughout South East Asia. Both subsidiaries purchase the products at cost and
sell the products at 90 percent markup. The other operating costs of the subsidiaries are
very low. Medi Darussalam has a research and development center in Brunei that focuses
on improving its medical technology. Sihat Begawan has a similar center based in
Singapore. The parent of each firm subsidizes its respective research and development
center on an annual basis. Which company is subject to a higher degree of economic
exposure? Justify your answer with thorough explanation on both companies.
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