Vitro-X in Malaysia has a subsidiary in Japan. Hence, Vitro-X receives Japanese Yen from the subsidiary, but this has negatively affected company value of Vitro-X, probably because of __________.
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appreciation of the Japanese Yen
lowering of Japanese interest rates
weaker Japanese economy
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- Consider a U.S. firm that deals in only one foreign currency, the peso. Fill in the blanks to describe the economic exposure of the firm to changes in the value of the peso. If the peso depreciates, interest from investments in Mexico will likely investments will If the peso depreciates, the in borrowed funds from Mexico increases However, if the peso appreciates, interest from those decreases on borrowed funds from Mexico However, if the peso appreciates, the interest owed onWhy does Apple Operations International (AOI)— the Irish subsidiary that captures most of Apple’s global profits outside the Americas— not pay taxes to Ireland or the United States?Pulaski Inc. wants to establish a new subsidiary in Colombia that will sell cell phones to Colombian customers and remit earnings back to the U.S. parent. The value of this project will be favorably affected if the value of the peso ____ while it establishes the new subsidiary and ____ when the subsidiary starts operations. appreciates; appreciates depreciates; appreciates appreciates; depreciates depreciates; depreciates
- Given that Thai roller blade manufacturers located in Thailand have begun targeting the U.S. roller blade market, how do you think Blades’ U.S. sales were affected by the depreciation of the Thai baht? How do you think its exports to Thailand and its imports from Thailand and Japan were affected by the depreciation?Synergy Incorporated, a US based Multinational Company (MNC) manufacturing electrical appliances. The company currently having problem of increasing in labor cost and therefore it affects the company's has profit. The company has decided to reduce the cost. The Board of Directors is considering building a plant in South East Asia, Singapore and Indonesia are countries under consideration. Below are the estimatedcash flow and exchange rate for both countries. Singapore Indonesia Forecasted Cash Flow Forecasted Exchange Year Cash Flow (IND) Exchange (SGD) (USD/SGD) (USD/IDR) 2017 (300,000) SGD4.4852 (5,200,000) IDR49.582 2018 65,000 SGD4.0614 1,500,000 IDR49.9648 2019 52,000 SGD4.1323 1,600,000 IDR52.4211 2020 60,000 SGD4.0905 1,800,000 IDR50.6107 2021 75,000 SGD4.4028 2,500,000 IDR51.3034 Based on the information, compute the potential investment's net present value (NPV) for Singapore and Indonesia if the company has weighted cost of capital of 10 and 12 percent. Suggest which location…The Japanese yen increases in value relative to the dollar, moving from 120 yento 110 yen to each U.S. dollar. From the perspective of a U.S. firm that produces in the UnitedStates and exports its product to sell in Japan:a. This is bad news.b. It doesn’t matter.c. This is good news
- If the income level in Mexico increases exponentially with stagnant growth in the U.S. income level would most likely lead to (assuming no change in interest rates or other factors) a ____ in Mexican demand for U.S. goods, and the Mexican peso should ____. A. decrease; depreciate B. increase; depreciate C. increase; appreciate D. decrease; appreciateSingapore through Pacific Oil imports tons of crude petroleum from neighbouring country Malaysia annually to manage the high consumption demand in the country and abroad. However, top management in Pacific Oil is not comfortable with the idea of using derivatives as a way to manage the transaction exposure. (i) Theoretically, why do the top management in Pacific Oil are not in favour in using derivative to manage the transaction exposure? (ii) Describe other strategies to manage the transaction exposure.Following an unanticipated dollar appreciation, would you recommend that a domestic manufacturing company such as Cummins Engine sell foreign assets? Yes or No
- Consider a US-based MNC with a wholly owned Italian subsidiary. Following a depreciation of the dollar against the euro, which of the following conclusions are correct? Group of answer choices a. The cash flow in euros could be altered due a change in the firm's competitive position in the marketplace. b. A given operating cash flow in euros will be converted to a higher US dollar cash flow. c. Both A and B d. None of the aboveSuppose 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)…The rise of globalization is due to the many companies that have become multinational corporations for various reasons—for example, to access better technology, to enter new markets, to obtain more raw materials, to find funding resources, to minimize production costs, or to diversify business risk. This multimarket presence exposes companies to different kinds of risk as well—for example, political risk and exchange rate risk. Several factors affect the exchange rate of a currency with another currency. Which of the following statements are true about the factors that have an impact on exchange rates? Check all that apply. If a government intends to prevent its currency’s value from falling relative to other currencies, it will purchase its currency from sellers in the market. If the demand for a currency increases, the currency’s value will increase relative to other currencies. When a government limits imports and restricts foreign exchange transactions, its currency’s value tends…
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