To conduct this manufacturing they import certain electronic components from countries like Japan and South Korea. The
Question:
To conduct this manufacturing they import certain electronic components from countries like Japan and South Korea.
The market for the manufactured tools are the U.S.A, Australia, Canada and United Kingdom (U.K). However, the majority of sales is in the U.K. Therefore, the company has already put up a subsidiary in the U.K. It resells and distribute the products to different businesses. The quarterly net profit after tax generated by the subsidiary is £500,000. The exports to Canada and Australia are to other independent distributing companies that buys the tools at wholesale prices from HighTech.
HighTech is also considering the construction of an electronic component manufacturing plant in the U.S.A. to eliminate the risks and costs associated with the current importing of electronic components from countries like Japan and South Korea.
HighTech already has sufficient manufacturing space available and only has to import manufacturing equipment of 63,000,000 Yen from Japan. The installation of the machinery will be conducted by local U.S.A. companies and will cost $1,000,000.
The Chief Executive O
fficer (CEO) of HighTech, requests the following information to assist him with determining the extent of exchange rate risk and the availability of funds to conduct the multinational transactions: