What are the expected spot Canadian/Bruneian exchange rates over the next six years? Is the Canadian dollar expected to depreciate or appreciate against the Bruneian dollar during this project period? Is this prediction favourable to Blooming Blueberries’ project?
What are the expected spot Canadian/Bruneian exchange rates over the next six years? Is the Canadian dollar expected to depreciate or appreciate against the Bruneian dollar during this project period? Is this prediction favourable to Blooming Blueberries’ project?
What are the expected spot Canadian/Bruneian exchange rates over the next six years? Is the Canadian dollar expected to depreciate or appreciate against the Bruneian dollar during this project period? Is this prediction favourable to Blooming Blueberries’ project?
What are the expected spot Canadian/Bruneian exchange rates over the next six years? Is the Canadian dollar expected to depreciate or appreciate against the Bruneian dollar during this project period? Is this prediction favourable to Blooming Blueberries’ project?
2)What is the NPV of the project? Barry suggests the use of the Home Currency pproach.
3)What other exchange rate risk exposure should the company consider before investing in the project? Explain these risk exposures to Larry.
4)What other risk factors (besides exchange rate risk) should the company consider before investing in the project? Search The Straits Times (from Singapore) for news on Brunei, and identify one major issue that the company may face, other than exchange rate risk, that could sway Larry one way or the other regarding investing in Brunei.
5-If the company is able to borrow the 1 million Brunei dollars capital from a local bank in Brunei at 10%, will it make a difference whether it borrows the money in Canada or in Brunei? Barry says no, according to the Uncovered Interest Parity and Generalized Fisher Effect relationships between exchange rates and interest rates. Explain why this is so.
6-Based on all the above analyses, should the company invest in this distribution centre in Brunei?
Definition Definition Calculation used to evaluate the investment and financing decisions that involve cash flows occurring over multiple periods. NPV is calculated as the difference between the present value of cash inflow and cash outflow. NPV is used for capital budgeting and investment planning as well as to compare similar investment alternatives.
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