4. (a) Blackpool Co. exports 90 percent of its total production of goods in New Mexico...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
4. (a) Blackpool Co. exports 90 percent of its total production of goods in New Mexico to Latin American countries. Kakamega Co. sells all the products it produces in the United States, but it has a subsidiary in Spain that usually generates about 30 percent of its total earnings. Required: Compare the translation exposure of these two U.S. companies (6 points). (b) Assume that you live in the United States and invest $60,000 to establish a language school called Escuela de Ingles in Mexico City, Mexico. You set up a small subsidiary in Mexico with an office and an attached classroom that you lease. You hire local individuals in Mexico who can speak English and teach it to others. Your school offers two types of courses: a one-month structured course in English and a one-week intensive course for individuals who already know English but want to improve their skills before visiting the United States. You advertise both types of teaching services in local newspapers. Assume all revenue and expenses associated with your business are denominated in Mexican pesos. Your subsidiary sends most of the profits from the business in Mexico to you at the end of each month. Although your expenses are stable, your revenue varies with the number of clients who sign up for the courses in Mexico. Required: Answer each of the following questions as if you were serving on the board or as a manager of the business: (i) Explain how your business is subject to translation exposure (10 points). Accessibility: Unavailable 4. (a) Blackpool Co. exports 90 percent of its total production of goods in New Mexico to Latin American countries. Kakamega Co. sells all the products it produces in the United States, but it has a subsidiary in Spain that usually generates about 30 percent of its total earnings. Required: Compare the translation exposure of these two U.S. companies (6 points). (b) Assume that you live in the United States and invest $60,000 to establish a language school called Escuela de Ingles in Mexico City, Mexico. You set up a small subsidiary in Mexico with an office and an attached classroom that you lease. You hire local individuals in Mexico who can speak English and teach it to others. Your school offers two types of courses: a one-month structured course in English and a one-week intensive course for individuals who already know English but want to improve their skills before visiting the United States. You advertise both types of teaching services in local newspapers. Assume all revenue and expenses associated with your business are denominated in Mexican pesos. Your subsidiary sends most of the profits from the business in Mexico to you at the end of each month. Although your expenses are stable, your revenue varies with the number of clients who sign up for the courses in Mexico. Required: Answer each of the following questions as if you were serving on the board or as a manager of the business: (i) Explain how your business is subject to translation exposure (10 points). Accessibility: Unavailable
Expert Answer:
Related Book For
Posted Date:
Students also viewed these finance questions
-
In the IS-LM model, a decrease in the interest rate would be the result of a(n): A) increase in money demand. B) decrease in taxes. C) increase in the money supply. increase in government purchases....
-
One of the best methods of learning broad concepts in this text is to put yourself in the place of an MNC manager or board member and apply the concepts to make financial decisions. Board members do...
-
As you might imagine, the chart of accounts for a manufacturing firm would be different from that of a service firm. Not surprisingly, service firms differ so much that software now exists for almost...
-
A country's real GDP is growing at an annual rate of 3.1 percent, and the current rate of growth of per capita real GDP is 0.3 percent. What is the population growth rate in this nation?
-
Fill in the blanks with an appropriate word, phrase, or symbol(s). The money the borrower pays for the use of the lenders money is called the _________ .
-
Mr. Tam is the front man for the Asian American dance-rock band The Slants. Mr. Tam named his band The Slants to reclaim and take ownership of Asian stereotypes. The band draws inspiration for its...
-
Choosing cost drivers, activity-based costing, activity-based management. Pumpkin Bags (PB) is a designer of high quality backpacks and purses. Each design is made in small batches. Each spring, PB...
-
1. Prove: 1 + 2 + 3 + - + n = (n + 1) using lattice paths. 1+2+3++n= n+ 2 2. Solve a = 2n+1 - 1 with a = 1.
-
Assume you have decided to buy a new house in Malibu that costs $922,000. Now, let's think about Mortgage B, a 30-year adjustable-rate mortgage with no points. The interest rate offered is 5% and it...
-
In Problem 26, suppose you are confident about your own projections, but you are a little unsure about Italys actual machine screw requirement. What is the sensitivity of the project OCF to changes...
-
Red Zeppelin plc follows a strict residual dividend policy Its debtequity ratio is 3. (a) If earnings for the year are 180,000, what is the maximum amount of capital spending possible with no new...
-
M.V.P. Games has hired you to perform a feasibility study of a new video game that requires a $9 million initial investment. M.V.P. expects a total annual operating cash flow of $1,750,000 for the...
-
A firm had the following share prices: Jan 2010: 1.12; Jan 2011: 1.34; Jan 2012: 1.68; Jan 2013: 1.8825; Jan 2014: 2.18; Jan 2015: 2.07. The equity paid no dividends. What was the holding period...
-
Given the sequence of 16-bit control words below for the datapath in Figure 8-11 and the initial ASCII character codes in 8-bit registers, simulate the datapath to determine the alphanumeric...
-
Three possible future returns that will be provided by a stock arc as the following: 10%. 15%. and 20%. a) If all three possibilities are equally likely. calculate the expected return and standard...
-
A glass manufacturer produces hand mirrors. Each mirror is supposed to meet company standards for such things as glass thickness, ability to reflect, size of handle, quality of glass, color of...
-
Working in pairs, find the longest-running alliance relationship your research can find. Present its secrets for such longevity.
-
Corporate bankruptcies* climbed new heights during the Great Recession of 20082009. Firms ranging from mighty ones such as Lehman Brothers and General Motors to tiny entrepreneurial outfits dropped...
-
Undertaking FDI, by definition, means not investing in the MNE's home country. What are the ethical dilemmas here? What are your recommendations, as (1) MNE executives, (2) Labor union leaders of...
-
Identify the sources and discuss the consequences of bank runs, bank panics, and financial crises.
-
Explain why and how the government intervenes in the financial system, and the problems the government safety net creates.
-
Deflation is the rate of decline in the aggregate price level. Why might unexpected deflation be of particular concern to someone managing a bank?
Study smarter with the SolutionInn App