Questions and Answers of International Financial Management

Visit the corporate websites of Nestlé, one of the most multinational companies in the world, and study the scope of geographical diversification of its sales and revenues. Also, gather and evaluate
Using the data from http://federalreserve.gov/releases/h10/hist , first plot the monthly exchange rate between the euro and the U.S. dollar since January 2000, and try to explain why the exchange
A currency trader makes a market in a currency and attempts to generate speculative profits from dealing against other currency traders. Today electronic dealing systems are frequently used by
Do problem 4 again assuming you believe the September 2013 spot price will be $0.07061 per MXN.Data From Problem 4Using the quotations in Exhibit 7.3 , note that the September 2013 Mexican peso
In addition to the historic currency symbols, such as, $, ¥, £, and €, there is an official three-letter symbol for each currency that is recognized worldwide. These symbols can be found at the
Data on currency futures can be found at the CME Group website, www.cmegroup .com. Go the the “Delayed quotes” section of this website and see which currency futures contracts have increasing and
Bankware, a Boston-based company specializing in banking-related softwares, exported its software for automatic teller machines (ATM) to Oslo Commerce Bank, which is trying to modernize its
Exhibit 11.5 compares the spread between the prime borrowing rate and dollar LIBOR. Go to the Bloomberg website www.bloomberg.comews/bonds to see the current spread and the spread for three months
It is Tuesday afternoon, February 14, 2012. Richard May, Assistant Treasurer at American Digital Graphics (ADG), sits in his office on the thirty-fourth floor of the building that dominates
The Fisher effect (Chapter 6) suggests that nominal interest rates differ between countries because of differences in the respective rates of inflation. According to the Fisher effect and your
The Association for Financial Markets in Europe is a trade association representing the world bond market. A newsletter can be found at the website. Go to the website www.afme.eu to see what current
If Honda ADRs were trading at $44 when the underlying shares were trading in Tokyo at ¥3,945, what could you do to earn a trading profit? Use the information in problem 1 to help you, and assume
The J.P. Morgan website www.adr.com provides online data on trading in ADRs. From this website, what are the top 10 individual ADRs by ownership value?By ownership increases? Does there seem to be a
EuroNetting, an online netting company, offers a multilateral service that enables companies to run their netting efficiently over the Internet. See their website at www.euronetting.com to view their
Students interested in a professional designation in international cash management should explore the online program leading to a Certificate in International Cash Management (CertICM) at the
The chapter indicated that banker’s acceptances were negotiable money market instruments. You might be interested in including B/As in your portfolio. Fiscal Agents Savings and Investment Centre is
Explain how a country can run an overall deficit or surplus on its balance of payments.
Most companies make corporate decisions to maximize their profits, without taking into consideration the possibly negative effects of corporate activities on the environments, thereby contributing to
One of the major economic consequences of the covid-19 pandemic that started in early 2020 is the unusually high inflation rates in most countries. In March, 2022, for instance, the annual inflation
Discuss why the renminbi (RMB) has not yet become a global currency like the US dollar or the euro, despite China’s very large economy.
Suppose you are saving for your retirement. Would you invest in Bitcoin to finance your retirement? Why or why not?
Over the past decades, China has emerged as a global economic powerhouse. In 2020, China was the second-largest economy after the United States, with a nominal GDP of $14.7 trillion. The state of
In return for proving the company with funds, outside shareholders receive several rights that are legally protected. List the three most basic shareholder rights and discuss why it is important to
A pyramidal ownership structure is a popular means large shareholders often use to acquire control rights that exceed cash flow rights. Suppose Cathryn Gresham, the founder of company Alpha, owns 20
Discuss how foreign activist shareholders were able to influence Toshiba’s governance in a positive way by enabling a major reformation of the insular Japanese company in 2022.
Assume a call option contract on Australian dollars is available with an exercise price of $0.75/AUD and a contract size of AUD10,000. This is a European option, and the premium is $0.05/AUD.a. If
What were the major features of the Basel III accord?
Nike, a company headquartered in Beaverton, Oregon, is a major force in the sports footwear and fashion industry, with annual sales exceeding $12 billion, more than half of which now come from
Study the website of the International Monetary Fund (IMF), www.imf.org, and discuss the role of the IMF in dealing with balance-of-payment and currency crises.
It is often mentioned that the United States has a “market-centered” corporate governance system, whereas Germany has a “bank-centered” system. Review the website of the OECD, www.oecd.org ,
Using the quotations in Exhibit 7.3 , note that the September 2013 Mexican peso futures contract has a price of $0.07713 per MXN. You believe the spot price in September will be $0.08365 per MXN.
Coca-Cola, a well-known U.S. multinational company, derives about three-quarters of its revenue from overseas markets. It is thus highly likely that the company is exposed to currency risks.
Coca-Cola, a well-known U.S. multinational company, derives about three-quarters of its revenue from overseas markets. It is thus highly likely that the company is exposed to currency risks.
Assume the settlement rate in problem 2 is 61⁄8 percent. What is the solution now?Data From Problem 2 A bank sells a "three against six" $3,000,000 FRA for a three-month period begin- ning three
On the Tokyo Stock Exchange, Honda Motor Company stock closed at ¥3,945 per share on Thursday, April 11, 2013. Honda trades as an ADR on the NYSE. One underlying Honda share equals one ADR. On April
Bloomberg provides current values of many of the international stock indexes presented in Exhibit 13.11 at the website www.bloomberg.com . Go to this website and determine what country’s stock
You would like to invest in the Mexican stock market and consider two alternative ways of investing in Mexico: (i) the Mexican closed-end country fund trading on the New York Stock Exchange (NYSE)
You are hired as a political consultant for General Motors Company, which is considering building automobile plants in three countries: Brazil, China, and Poland. Choose a country and analyze the
You are the controlling shareholder of Dragon Semicon based in Taiwan, a company with a strong growth potential. In order to fund future growth, you are considering listing the company stock either
The website www.taxsites.com/international.html is a comprehensive site that provides links to many other websites. For example, go to the Worldwide-Tax link and learn about the history of taxation.
The Transfer Pricing Management Benchmarking Association conducts benchmarking studies to identify the best transfer pricing processes that will improve the overall operations of its members. Its
Construct the balance of payment table for Germany for year 2018 which is comparable in format to Exhibit 3.1, and interpret the numerical data. You may consult International Financial Statistics
Using the American term quotes from Exhibit 5.7, calculate the one-, three-, and six-month forward cross-exchange rates between the Australian dollar and the Swiss franc. State the forward
Nike, a company headquartered in Beaverton, Oregon, is a major force in the sports footwear and fashion industry, with annual sales exceeding $ 30 billions, more than half of which now come from
George Johnson is considering a possible six-month $100 million LIBOR-based, floating-rate bank loan to fund a project at terms shown in the table below. Johnson fears a possible rise in the LIBOR
Using the quotations in Exhibit 7.3, calculate the face value of the open interest in the September 2019 Swiss franc futures contract. EXHIBIT 7.3 June Sept Open Currency Futures Japanese Yen
James Clark is a foreign exchange trader with Citibank. He notices the following quotes.a. Is the interest rate parity holding? You may ignore transaction costs.b. Is there an arbitrage
Currently, the spot exchange rate is $0.85/A$ and the one-year forward exchange rate is $0.81/A$. One-year interest is 3.5% in the United States and 4.2% in Australia. You may borrow up to $1,000,000
Using the quotations in Exhibit 7.3, note that the June 2019 Mexican peso futures contract has a price of $0.05143 per MXN. You believe the spot price in June will be $0.05795 per MXN. What
Do problem 4 again assuming you believe the June 2019 spot price will be $0.04491 per MXN.Data from Probelem 4.Using the quotations in Exhibit 7.3, note that the June 2019 Mexican peso futures
Assume the settlement rate in problem 2 is 6.125 percent. What is the solution now?Data from Problem 2.A bank sells a “three against six” $3,000,000 FRA for a three-month period beginning three
Jacob Bower has a liability that:• Has a principal balance of $100 million on June 30, 2008,• Accrues interest quarterly starting on June 30, 2008,• Pays interest quarterly,• Has a
Using an example, discuss the possible effect of hedging on a firm’s tax obligations.
On the Tokyo Stock Exchange, Honda Motor Company stock closed at ¥2,907 per share on Monday, June 6, 2016. Honda trades as and ADR on the NYSE. One underlying Honda share equals one ADR. On
If Honda ADRs were trading at $31 when the underlying shares were trading in Tokyo at ¥2,907, what could you do to earn a trading profit? Use the information in problem 1, above, to help you and
Suppose a Spanish MNC has a mirror-image situation and needs $2,900,000 to finance a capital expenditure of one of its U.S. subsidiaries. It finds that it must pay a 9 percent fixed rate in the
Discuss the chief mistakes that Enron made in India.
Discuss what Enron might have done differently to avoid its predicament in India.
Study the experience of Enron in India, and discuss what we can learn from it for the management of political risk.
What is the purpose of the Export-Import Bank?
Using Exhibit 5.7, calculate the one-, three-, and six-month forward premium or discount for the Japanese yen versus the U.S. dollar using American term quotations. For simplicity, assume each month
Lured by extremely low labor costs in Bangladesh, many MNCs in the so-called fast-fashion business, including H&M, Inditex, parent of the popular Zara brand, Marks&Spencer, and Gap, are
With regards to the Centralia illustrated mini case in the chapter, how would the APV change if:a. The forecast of πd and/or πf are incorrect?b. Deprecation cash flows are discounted at
Pick a country and search the internet for newspaper or magazine articles that contain information related to the balance of payments of the country and corresponding movements in the foreign
Choose a country and analyze its balance of payments for the past 10 years. Good sources of data include official bulletins of the statistical authority of a country or its central banks;
Go to the IMF’s Web site at www.imf.org and download the 2016 World Economic Outlook. Pick your favorite country and determine if this is a good time to invest in it or not.
A company's issued share capital is £2 million, comprising four million ordinary shares of 25p each and one million 8% preference shares of £1. An extract from the company's statement of
The financial statements of R Ltd for the year to 30 April 2018 are as follows:R LtdStatement of comprehensive income for the year to 30 April 2018.Statement of financial position as at 30 April
The statement of financial position of Urbax plc at 31 July 2018 (with comparatives for the previous year) is shown below: Statement of financial position at 31 July 2018. (i) Equipment which had
The statements of financial position of Lochnagar Ltd for the past two years and the company's most recent income statement are set out below. Income statement for the year to 31 October 2018. ? ? ?
The summarised statement of comprehensive income of Scharp Ltd for the year to 30 June 2018 is shown below, together with the company's statement of financial position at that date (with comparatives
The pre-tax profits of Radfern Ltd for the last three years (as reported in its financial statements) have been as follows:
Glassmere Ltd (which applies IAS17) prepares accounts to 31 December each year. On 1 January 2014, the company acquired an asset by means of a finance lease. Details of the lease agreement are as
The carrying amounts of the assets of a cash-generating unit are as follows:
Determine the recoverable amount of each of the following four assets and state the amount of any impairment loss which should be recognised in each case: Carrying amount Fair value less Value in
Whilst preparing its financial statements for the year to 30 June 2018, a company discovers that (owing to an accounting error) the sales figure for the year to 30 June 2017 had been understated by
H Ltd began trading on 1 January 2014, preparing financial statements to 31 December each year. During 2017, the company decided to change its accounting policy with regard to one of its operating
E plc has an issued share capital consisting of 800,000 ordinary shares. There are no preference shares. Some years ago, the company issued £1 million of 10% convertible loan stock, convertible in
The profits after tax of D plc are as follows:
C plc has the following after-tax profits for its two most recent accounting periods:
The profit after tax of B plc for the year to 30 June 2018 is £217,500. The comparative figure for the year to 30 June 2017 was £188,000. On 1 July 2016, the company's issued share capital
During the year to 31 December 2017, Tinderlake Ltd attempted to stimulate sales and increase its profits by reducing selling prices, holding larger inventories and giving customers longer credit.
The issued share capital of Soresson plc consists of 1,000,000 ordinary shares of 50p each and 250,000 6% preference shares of £1 each.In the year to 31 March 2018, the company's profit after tax
Company X is an old-established clothing retailer. The company operates from expensive city centre premises and offers a high standard of customer service. The company's customers are willing to pay
On 1 July 2017, a UK company formed a foreign subsidiary in a country which has the Florin (Fn) as its currency. The summarised financial statements of this subsidiary for the years to 30 June 2018
Dalle Ltd is a UK company which has the pound sterling as its functional currency. The company has the following transactions in Euros (€) during the year to 31 March 2018:1 January 2018.....
The following information relates to Z plc:(a) Alan owns 27% of the ordinary shares of Z plc. Elaine is his wife.(b) Z plc owns 60% of the ordinary shares of Y plc.(c) Z plc owns 15% of the ordinary
On 30 September 2014, K Ltd paid ?140,000 to acquire 40% of the share capital of L Ltd (which became its associate). Draft financial statements for these two companies for the year to 30 September
The statements of financial position of M Ltd, P Ltd and Q Ltd as at 31 July 2018 are as follows: The following information is available: (a) On 31 July 2015, M Ltd paid ?410,000 to acquire 90% of
(a) Explain what is meant by the terms "associate" and "significant influence".(b) Explain the equity method of accounting which is used to account for an investment in an associate. Also explain how
The Managing Director of Wraymand plc has asked you to prepare the statement of comprehensive income for the group. The company has one subsidiary undertaking, Blonk Ltd. The statements of
On 1 March 2018, YY Ltd acquired 85% of the ordinary share capital of ZZ Ltd. There are no preference shares. Both companies prepare financial statements to 31 October each year. Transactions
FF Ltd acquired 80% of the ordinary share capital of GG Ltd on 1 April 2014. On that date, the retained earnings of GG Ltd were ?18,260. There are no preference shares. The statements of
PP Ltd acquired 65% of the ordinary share capital of QQ Ltd on 1 January 2017. There are no preference shares. The statements of comprehensive income of the two companies for the year to 31 December
Klarke plc acquired a subsidiary, Cameroon Ltd, on 1 October 2017. The statements of financial position of Klarke plc and Cameroon Ltd as at 30 September 2018 are as follows: Additional data: (i)
The statements of financial position of TT Ltd and UU Ltd as at 31 May 2018 are as follows: The following information is available: (i) TT Ltd acquired 70% of the share capital of UU Ltd on 31 May
The statements of financial position of AA Ltd and BB Ltd as at 30 April 2018 are as follows: The following information is relevant: (i) AA Ltd acquired the entire share capital of BB Ltd on 30
On 31 December 2017, A3 Ltd paid ?550,000 to acquire 80% of the ordinary share capital of A4 Ltd. The statements of financial position of the two companies just after this transaction were as
At the start of business on 1 January 2018, the statements of financial position of A1 Ltd and A2 Ltd were as follows: On 1 January 2018, A1 Ltd acquired 100% of the share capital of A2 Ltd for
(a) Explain the term "historical cost accounting".(b) Summarise the strengths and weaknesses of historical cost accounting.(c) Identify and briefly explain the two main alternatives to historical

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