Multinational financial management 10th edition Alan c. Shapiro - Solutions

Discover comprehensive solutions and answers to the challenging questions from "Multinational Financial Management, 10th Edition" by Alan C. Shapiro. Our online platform offers an extensive solution manual, including step-by-step answers and a test bank for deeper understanding. Access the instructor manual and textbook chapter solutions, ensuring every problem is thoroughly solved. Whether you're looking for an answers key or a solutions PDF, our resources are designed to facilitate your learning experience. Enjoy free downloads of questions and answers to enhance your study sessions with detailed, solved problems.

Farbucks is thinking of expanding to South Korea. The current indirect rate for dollars and South Korean won is 1025. The inflation rate in South Korea is expected to hover near 0.5% for the next five years. The U.S. inflation rate is expected to stay around 3.0%. The discount rate for expanding
Verify your answer to Problem 17 using the foreign-currency approach.From Problem 17Investment: A$ 40,000,000Cash Flows: Year 1 – A$ 5,000,000Year 2 – A$ 9,000,000Year 3 – A$ 16,000,000Year 4 – A$ 20,000,000Year 5 – A$ 8,000,000Year 6 – A$ 3,000,000
Verify your answer to Problem 18 using the foreign-currency approach.From Problem 18Cash Flows: Year 0, initial investment costs Won 82,000,000 per coffee shopYear 1, – Won 25,000,000Year 2, Won 30,000,000Year 3, Won 70,000,000Year 4, Won 90,000,000Year 5, Won 45,000,000
This case requires students to consider business and political risks associated with international business operations. It requires them to use techniques illustrated in the chapter to solve basic but realistic foreign exchange problems. Finally, it requires practical application of hedging and
On the day you arrive in New Zealand, the exchange rate for U.S. dollars and New Zealand dollars is $1:2.25 NZ$. While you remain in New Zealand for the next few months, the exchange rate falls to $1:$1.75439 NZ$. When you entered New Zealand, you converted US$10,500 to NZ$. As you leave New
You plan on traveling to South Korea and China on a business trip. You will first stop in Korea, where the current direct exchange rate is $1: 1243.78SK Won. You will next stop in China, where the current direct exchange rate is $1: Yuan 6.83013. As you leave South Korea, you have 825,000 Won and
On-Line Currency, Incorporated is an online currency exchange company that will immediately convert and credit your bank account based on its published rates. Being the smart finance major that you are, you notice that one of the rates published below is incorrect, and you want to take advantage of
The Wall Street Journal lists forward rates for Euros. Say that the current listings are:1-month forward rate (indirect) 0.70253-month forward rate (indirect) 0.71456-month forward rate (indirect) 0.7245First, is the anticipated inflation rate higher or lower in Europe compared to that in the
Kalamazoo Marine wants to expand its operations to New Zealand. The current indirect exchange rate is 1.75 for U.S. and New Zealand dollars. The anticipated inflation rate is 3.8% in the United States, but only 1.75% in New Zealand. The discount rate in the United States for the expansion project
1. What advantages does General Electric seek to attain from its international business activities?2. What actions is it taking to gain these advantages from its international activities?3. What risks does GE face in its foreign operations?4. What profit opportunities for GE can arise out of those
1. What are the pros and cons of outsourcing?2. How does outsourcing affect U.S. consumers? U.S. producers?3. Longer term, what is the likely impact of outsourcing on American jobs?4. Several states are contemplating legislation that would ban the outsourcing of government work to foreign firms.
1. What was ARCO Chemical’s rationale for globalizing?2. What advantages has ARCO Chemical realized from its global operations?3. What threats have arisen from ARCO Chemical’s globalizing efforts? What are some ways in which ARCO Chemical has responded to these threats?4. How has globalization
1. What might explain the candidates’ and Democratic Party’s reversal of position on free trade? Which voting constituencies would be most likely to reject free trade? Why?2. What leverage do the trade unions have in persuading Al Gore and other Democratic candidates to pay attention to their
a. What are the various categories of multinational firms?b. What is the motivation for international expansion of firms within each category?
a. How does foreign competition limit the prices that domestic companies can charge and the wages and benefits that workers can demand?b. What political solutions can help companies and unions avoid the limitations imposed by foreign competition?c. Who pays for these political solutions? Explain.
a. What factors appear to underlie the Asian currency crisis?b. What lessons can we learn from the Asian currency crisis?
a. What is an efficient market?b. What is the role of a financial executive in an efficient market?
a. What is the capital asset pricing model?b. What is the basic message of the CAPM?c. How might a multinational firm use the CAPM?
Why might total risk be relevant for a multinational corporation?
A memorandum by Labor Secretary Robert Reich to President Bill Clinton suggested that the government penalize U.S. companies that invest overseas rather than at home. According to Reich, this kind of investment hurts exports and destroys well-paying jobs. Comment on this argument.
Are multinational firms riskier than purely domestic firms? What data would you need to address this question?
Is there any reason to believe that MNCs may be less risky than purely domestic firms? Explain.
In what ways do financial markets grade government economic policies?
1. In a satirical petition on behalf of French candlemakers, Frederic Bastiat, a French economist, called attention to cheap competition from afar: sunlight. A law requiring the shuttering of windows during the day, he suggested, connected with lighting’’ and the country as a whole. He
1. What were the origins of the Asian currency crisis?2. What role did expectations play in the Asian currency crisis?3. How did the appreciation of the U.S. dollar and depreciation of the yuan affect the timing and magnitude of the Asian currency crisis?4. What is moral hazard and how did it help
1. What was the impetus for Argentina's currency board system?2. How successful was Argentina's currency board?3. What led to the downfall of Argentina's currency board?4. What lessons can we learn from the experience of Argentina's currency board?Argentina, once the world's seventh-largest
1. How did China and Japan manage to weaken their currencies against the dollar?2. Why did the U.S. dollar and U.S. Treasury bonds fall in response to the G7 statement?3. What is the link between currency intervention and China and Japan buying U.S. Treasury bonds?4. What risks do China and Japan
1. Why is China trying to hold down the value of the yuan? What evidence suggests that China is indeed pursuing a weak currency policy?2. What benefits does China expect to realize from a weak currency policy?3. Other things being equal, what would a 27.5% tariff cost American consumers annually on
Describe how these three typical transactions should affect present and future exchange rates:a. Seagram imports a year's supply of French champagne. Payment in French francs is due immediately.b. MCI sells a new stock issue to Alcatel, the French telecommunications company. Payment in dollars is
For each of the following six scenarios, state whether the value of the dollar will appreciate, depreciate, or remain the same relative to the Japanese yen. Explain each answer. Assume that exchange rates are free to vary and that other factors are held constant.a. The growth rate of national
The Fed adopts an easier monetary policy. How is this likely to affect the value of the dollar and U.S. interest rates?
Comment on the following headline from the New York Times. ''Germany Raises Interest Rate and Value of Dollar Declines'' (October 10, 1997).
On November 28, 1990, Federal Reserve Chairman Alan Greenspan told the House Banking Committee that despite possible benefits to the U.S. trade balance, ''a weaker dollar also is a cause for concern.'' This statement departed from what appeared to be an attitude of benign neglect by U.S. monetary
Many Asian governments have attempted to promote their export competitiveness by holding down the value of their currencies through foreign exchange market intervention.a. What is the likely impact of this policy on Asian foreign exchange reserves? On Asian inflation? On Asian export
As mentioned in the chapter, Hong Kong has a currency board that fixes the exchange rate between the U.S. and H.K. dollars.a. What is the likely consequence of a large capital inflow for the rate of inflation in Hong Kong? For the competitiveness of Hong Kong business? Explain.b. Given a large
In 1994, an influx of drug money to Colombia coincided with a sharp increase in its export earnings from coffee and oil.a. What was the likely impact of these factors on the value of the Colombian peso and the competitiveness of Colombia's legal exports? Explain.b. In 1996, Colombia's president,
On August 8, 2000, Zimbabwe changed the value of the Zim dollar from Z$38/US$ to Z$50/US$.a. What was the original U.S. dollar value of the Zim dollar? What is the new U.S. dollar value of the Zim dollar?b. By what percentage has the Zim dollar devalued (revalued) relative to the U.S. dollar?c. By
In early August 2002 (the exact date is a state secret), North Korea reduced the official value of the won from $0.465 to $0.0067. The black market value of the won at that time was $0.005.a. By what percentage did the won devalue?b. Following the initial devaluation, what further percentage
On Friday, September 13, 1992, the lira was worth DM 0.0013065. Over the weekend, the lira devalued against the DM to DM 0.0012613.a. By how much had the lira devalued against the DM?b. By how much had the DM appreciated against the lira?c. Suppose Italy borrowed DM 4 billion, which it sold to prop
1. What are the current exchange rate regimes of the BRIC economies?2. Why has Brazil changed its exchange rate regime over the years?3. What variable affects the Russian ruble?4. By how much did the yuan appreciate against the dollar on July 21, 2005?5. How has the yuan's appreciation since July
1. What are competitive currency devaluations? What triggered them in 2003?2. What mechanisms are used to create competitive devaluations?3. What is QE2, and how does it affect the value of the U.S. dollar?4. What are the effects of QE2 on other economies and why are nations opposed to it?5. What
1. Explain the differing initial and subsequent reactions of the euro to news about the European Central Bank's monetary policy.2. How does a strong pound reduce the threat of imported inflation and work against higher interest rates?3. Which U.K. manufacturers are likely to be pressured by a
1. Discuss the pros and cons for Britain's joining the EMU.2. Commentators pointed to the fact that many people in Britain have variable rate mortgages, as opposed to the fixed-rate mortgages more common in Europe. Britain also has the most flexible labor markets in Europe. How would these factors
1. What event initially precipitated the Greek crisis?2. Why was Greece in so much trouble?3. What problems in Greece highlighted wider problems in the Eurozone?4. How did the Greek crisis affect the euro?5. What pro-growth policies could the Greeks adopt that would allow them to produce more and
1. Why was Ireland in trouble?2. What happened to Irish debt? To Irish bond ratings? Interest rates?3. How did the Irish crisis highlight problems with the Eurozone?4. What must Ireland do to solve its problem?In November 2010, Ireland received a bailout equivalent to $27, 142 per capita. This
a. What are the five basic mechanisms for establishing exchange rates?b. How does each work?c. What costs and benefits are associated with each mechanism?d. Have exchange rate movements under the current system of managed floating been excessive? Explain.
The experiences of fixed exchange rate systems and targetzone arrangements have not been entirely satisfactory.a. What lessons can economists draw from the breakdown of the Bretton Woods system?b. What lessons can economists draw from the exchange rate experiences of the European Monetary System?
How did the European Monetary System limit the economic ability of each member nation to set its interest rate to be different from Germany's?
Historically, Spain has had high inflation and has seen its peseta continuously depreciate. In 1989, however, Spain joined the EMS and pegged the peseta to the DM. According to a Spanish banker, EMS membership means that ''the government has less capability to manage the currency but, on the other
In discussing the European Monetary Union, a recent government report stressed a need to make the central bank accountable to the ''democratic process.'' What are the likely consequences for price stability and exchange rate stability in the EMS if the ECB becomes accountable to the ''democratic
Comment on the following statement: ''With monetary union, the era of protection for European firms and workers has come to an end.''
Comment on the following statement: ''The French view European Monetary Union as a way to break the Bundesbank's dominance in setting monetary policy in Europe.''
During the currency crisis of September 1992, the Bank of England borrowed DM 33 billion from the Bundesbank when a pound was worth DM 2.78, or $1.912. It sold these DM in the foreign exchange market for pounds in a futile attempt to prevent a devaluation of the pound. It repaid these DM at the
Suppose the central rates within the ERM for the French franc and DM are FF 6.90403: ECU 1 and DM 2.05853: ECU 1, respectively.a. What is the cross-exchange rate between the franc and the mark?b. Under the former 2.25% margin on either side of the central rate, what were the approximate upper and
A Dutch company exporting to France had FF 3 million due in 90 days. Suppose that the spot exchange rate was FF 1 = DFl 0.3291.a. Under the exchange rate mechanism, and assuming central rates of FF 6.45863/ECU and DFL 2.16979/ECU, what was the central cross-exchange rate between the two
Panama adopted the U.S. dollar as its official paper money in 1904. Currently, $400 million to $500 million in U.S. dollars is circulating in Panama. If interest rates on U.S. Treasury securities are 7%, what is the value of the seignorage that Panama is forgoing by using the U.S. dollar instead of
By some estimates, $185 billion to $260 billion in currency is held outside the United States.a. What is the value to the United States of the seignorage associated with these overseas dollars? Assume that dollar interest rates are about 6%.b. Who in the United States realizes this seignorage?
1. Suppose the tariff were levied solely on imported crude. In an integrated world economy, who would be hurt? Who would benefit? Why? What would be the longer-term consequences?2. If a $10/barrel tariff were levied on imported refined products (but no tariff were levied on crude oil), who would
1. How were financial markets likely to respond to President Carter’s lecture? Explain.2. At the time President Carter made his remarks, the inflation rate was running at about 10% annually and accelerating as the Federal Reserve continued to pump up the money supply to finance the growing
a. What is purchasing power parity?b. What are some reasons for deviations from purchasing power parity?c. Under which circumstances can purchasing power parity be applied?
One proposal to stabilize the international monetary system involves setting exchange rates at their purchasing power parity rates. Once exchange rates were correctly aligned (according to PPP) each nation would adjust its monetary policy so as to maintain them. What problems might arise from using
Comment on the following statement. ''It makes sense to borrow during times of high inflation because you can repay the loan in cheaper dollars.''
From 1982 to 1988, Peru and Chile stand out as countries whose interest rates were not consistent with their inflation experience. Specifically, Peru's inflation and interest rates averaged about 125% and 8%, respectively, over this period, whereas Chile's inflation and interest rates averaged
From 1982 to 1988, a number of countries (e.g., Pakistan, Hungary, Venezuela) had a small or negative interest rate differential and a large average annual depreciation against the dollar. How would you explain these data? Can you reconcile these data with the international Fisher effect?
In early 1989, Japanese interest rates were about 4 percentage points below U.S. rates. The wide difference between Japanese and U.S. interest rates prompted some U.S. real estate developers to borrow in yen to finance their projects. Comment on this strategy.
In early 1990, Japanese and German interest rates rose while U.S. rates fell. At the same time, the yen and DM fell against the U.S. dollar. What might explain the divergent trends in interest rates?
In late December 1990, one-year German Treasury bills yielded 9.1%, whereas one-year U.S. Treasury bills yielded 6.9%. At the same time, the inflation rate during 1990 was 6.3% in the United States, double the German rate of 3.1%.a. Are these inflation and interest rates consistent with the Fisher
The spot rate on the euro is $1.39, and the 180-day forward rate is $1.41. What are possible reasons for the difference between the two rates?
German government bonds, or Bunds, currently are paying higher interest rates than comparable U.S. Treasury bonds. Suppose the Bundesbank eases the money supply to drive down interest rates. How is an American investor in Bunds likely to fare?
In 1993 and early 1994, Turkish banks borrowed abroad at relatively low interest rates to fund their lending at home. The banks earned high profits because rampant inflation in Turkey forced up domestic interest rates. At the same time, Turkey’s central bank was intervening in the foreign
From base price levels of 100 in 2000, Japanese and U.S. price levels in 2003 stood at 102 and 106, respectively.a. If the 2000 $:¥ exchange rate was $0.007692, what should the exchange rate be in 2003?b. In fact, the exchange rate in 2003 was ¥ 1 = $0.008696. What might account for the
Two countries, the United States and England, produce only one good wheat. Suppose the price of wheat is $3.25 in the United States and is £1.35 in England.a. According to the law of one price, what should the $:£ spot exchange rate be?b. Suppose the price of wheat over the next year is expected
In early 1996, the short-term interest rate in France was 3.7% and forecast French inflation was 1.8%. At the same time, the short-term German interest rate was 2.6% and forecast German inflation was 1.6%.a. Based on these figures, what were the real interest rates in France and Germany?b. To what
Suppose that in Japan the interest rate is 8% and inflation is expected to be 3%. Meanwhile, the expected inflation rate in France is 12%, and the English interest rate is 14%. To the nearest whole number, what is the best estimate of the one-year forward exchange premium (discount) at which the
Chase Econometrics has just published projected inflation rates for the United States and Germany for the next five years. U.S. inflation is expected to be 10% per year, and German inflation is expected to be 4% per year.a. If the current exchange rate is $0.95/€, forecast the exchange rates for
During 1995, the Mexican peso exchange rate rose from Mex$5.33/US$ to Mex $7.64/US$. At the same time, U.S. inflation was approximately 3% in contrast to Mexican inflation of about 48.7%.a. By how much did the nominal value of the peso change during 1995?b. By how much did the real value of the
Assume that the interest rate is 16% on pounds sterling and 7% on euros. At the same time, inflation is running at an annual rate of 3% in Germany and 9% in England.a. If the euro is selling at a one-year forward premium of 10% against the pound, is there an arbitrage opportunity? Explain.b. What
Suppose the spot rates for the euro, pound sterling, and Swiss franc are $1.52, $2.01, and $0.98, respectively. The associated 90-day interest rates (annualized) are 8%, 16%, and 4%; the U.S. 90-day rate (annualized) is 12%. What is the 90-day forward rate on an ACU (ACU 1 = €1 + £1 + SFr 1) if
Suppose that three-month interest rates (annualized) in Japan and the United States are 7% and 9%, respectively.If the spot rate is ¥142: $1 and the 90-day forward rate is ¥139: $1,a. Where would you invest?b. Where would you borrow?c. What arbitrage opportunity do these figures present?d.
Here are some prices in the international money markets:Spot rate = $1.46 : €Forward rate (one year) = $1.49: €Interest rate (€) = 7% per year Interest rate ($) = 9% per yeara. Assuming no transaction costs or taxes exist, do covered arbitrage profits exist in this situation? Describe the
Suppose today's exchange rate is $1.55/€. The six-month interest rates on dollars and euros are 6% and 3%, respectively. The six-month forward rate is $1.5478. A foreign exchange advisory service has predicted that the euro will appreciate to $1.5790 within six months.a. How would you use
Suppose that on January 1, the cost of borrowing French francs for the year is 18%. During the year, U.S. inflation is 5%, and French inflation is 9%. At the same time, the exchange rate changes from FF 1 = $0.15 on January 1 to FF 1 = $0.10 on December 31. What was the real U.S. dollar cost of
1. What is the link between South Korea’s currency market interventions and its growing foreign exchange reserves?2. What is the annualized cost to the Bank of Korea of maintaining $205.5 billion in reserves? Assume that the government of Korea is issuing bonds that yield about 4% annually while
1. In what way is Warren Buffett’s plan the equivalent of a tariff? What would be its likely impact on American consumers?2. What would be the likely effect of Mr. Buffett’s plan on U.S. exports?3. How would Buffett’s plan likely affect saving, investment, and interest rates in the United
a. As the value of the U.S. dollar rises, what is likely to happen to the U.S. balance on current account? Explain.b. What is likely to happen to the value of the dollar as the U.S. current-account deficit increases? Explain.c. A current-account surplus is not always a sign of health; a
Suppose Lufthansa buys $400 million worth of Boeing jets in 2010 and is financed by the U.S. Eximbank with a five year loan that has no principal or interest payments due until 2011. What is the net impact of this sale on the U.S. current account, financial account, and overall balance of payments
a. What happens to Mexico’s ability to repay its foreign loans if the United States restricts imports of Mexican agricultural produce?b. Suppose Brazil starts welcoming foreign investment with open arms. How is this policy likely to affect the value of the Brazilian real? The Brazilian current
During the 1990s, Mexico and Argentina went from economic pariahs with huge foreign debts to countries posting strong economic growth and welcoming foreign investment. What would you expect these changes to do to their current-account balances?
Suppose the trade imbalances of the 2000s largely disappear during the next decade. What is likely to happen to the huge global capital flows of the 2000s? What is the link between the trade imbalances and the global movement of capital?
In the early 1990s, Japan underwent a recession that brought about a prolonged slump in consumer spending and capital investment. (Some estimate that in 1994 only 65% of Japan’s manufacturing capacity was being used.) At the same time, the U.S. economy emerged from its recession and began
According to the World Competitiveness Report 1994, with freer markets, Third World nations now are able to attract capital and technology from the advanced nations. As a result, they can achieve productivity close to Western levels while paying low wages. Hence, the low-wage Third World nations
How would each of the following transactions show up on the U.S. balance-of-payments accounts?a. Payment of $50 million in Social Security to U.S. citizens living in Costa Ricab. Sale overseas of 125,000 Elvis Presley CDsc. Tuition receipts of $3 billion received by American universities from
Set up the double-entry accounts showing the appropriate debits and credits associated with the following transactions:a. ConAgra, a U.S. agribusiness, exports $80 million of soybeans to China and receives payment in the form of a check drawn on a U.S. bank.b. The U.S. government provides refugee
During the year, Japan had a current-account surplus of $98 billion and a financial-account deficit, aside from the change in its foreign exchange reserves, of $67 billion.a. Assuming the preceding data are measured with precision, what can you conclude about the change in Japan’s foreign
The following transactions (expressed in US$ billions) take place during a year. Calculate the U.S. merchandise-trade, current-account, financial-account, and official reserves balances.a. The United States exports $300 of goods and receives payment in the form of foreign demand deposits abroad.b.
During the Reagan era, 1981â€“1988, the U.S. current account moved from a tiny surplus to a large deficit. The following table provides U.S. macroeconomic data for that period.a. Based on these data, to what extent would you attribute the changes in the U.S. current-account balance to a
1. What are key elements of country risk in Zimbabwe?2. How has increased country risk affected Zimbabwe’s economy and living standards?3. By how much is the Zim dollar at its official rate overvalued relative to its black market rate?4. What caused the Zim dollar to be so overvalued? What effect
What are some indicators of country risk? Of country health?
What can we learn about economic development and political risk from the contrasting experiences of East and West Germany; North and South Korea; and China and Taiwan, Hong Kong, and Singapore?
What role do property rights and the price system play in national development and economic efficiency?

Showing 5900 - 6000 of 20267

First
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
Last

Multinational financial management 10th edition Alan c. Shapiro - Solutions

Step by Step Answers