(a) Durian's Aneka Sdn Bhd is a Malaysian durian processed-foods manufacturer. Its products range from tarts,...

 

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(a) Durian's Aneka Sdn Bhd is a Malaysian durian processed-foods manufacturer. Its products range from tarts, cookies, snacks, sweets to ice-creams. Currently, it only has one production facility located in Raub, Pahang. Demand for its products has been continuously growing in the European region. In a recent board meeting, the Board of Directors discussed on whether to establish a new production facilities in two Scandinavian countries, namely Sweden and Norway. The initial outlays to set up new production facilities are Swedish krona (SEK) 615,000 and Norwegian krone (NOK) 594,000 respectively. The project based in Stockholm, Sweden, is expected to generate after-tax net cash inflow of SEK 400,000 at the end of each year for the next two years. The project based in Oslo, Norway, is expected to generate after-tax net cash inflow of NOK 390,000 at the end of each year for the next two years. Both of these Scandinavian projects have similar business risk as its business model in Malaysia. Its home country weighted average cost of capital is 14.80%. Current spot rates in the FOREX are SEK2.0500/MYR and NOK1.9800/MYR. Inflation rates in Malaysia, Sweden and Norway are expected to be 6%, 4% and 8% per annum respectively over the next two years. Required: (i) Assume that the Purchasing Power Parity (PPP) holds, estimate future spot rates for SEK/MYR and NOK/MYR at the end of year I and year (8 marks) 2. (ii) Compute Net Present Value (NPv) in MYR for the Sweden-based project and the Norway-based project. Decide whether each of these projects is acceptable if they are independent projects and mutually exclusive projects respectively. (16 marks) (b) Explain FOUR (4) factors that multinational corporations will consider when deciding where to locate their foreign operations. Evaluate whether Malaysia is more or less attractive destination for multinational corporations to locate their operations if compared to BRICS emerging economies. Support your evaluation with facts and cite the sources of information. (36 marks) [Total: 60 marks] (a) Durian's Aneka Sdn Bhd is a Malaysian durian processed-foods manufacturer. Its products range from tarts, cookies, snacks, sweets to ice-creams. Currently, it only has one production facility located in Raub, Pahang. Demand for its products has been continuously growing in the European region. In a recent board meeting, the Board of Directors discussed on whether to establish a new production facilities in two Scandinavian countries, namely Sweden and Norway. The initial outlays to set up new production facilities are Swedish krona (SEK) 615,000 and Norwegian krone (NOK) 594,000 respectively. The project based in Stockholm, Sweden, is expected to generate after-tax net cash inflow of SEK 400,000 at the end of each year for the next two years. The project based in Oslo, Norway, is expected to generate after-tax net cash inflow of NOK 390,000 at the end of each year for the next two years. Both of these Scandinavian projects have similar business risk as its business model in Malaysia. Its home country weighted average cost of capital is 14.80%. Current spot rates in the FOREX are SEK2.0500/MYR and NOK1.9800/MYR. Inflation rates in Malaysia, Sweden and Norway are expected to be 6%, 4% and 8% per annum respectively over the next two years. Required: (i) Assume that the Purchasing Power Parity (PPP) holds, estimate future spot rates for SEK/MYR and NOK/MYR at the end of year I and year (8 marks) 2. (ii) Compute Net Present Value (NPv) in MYR for the Sweden-based project and the Norway-based project. Decide whether each of these projects is acceptable if they are independent projects and mutually exclusive projects respectively. (16 marks) (b) Explain FOUR (4) factors that multinational corporations will consider when deciding where to locate their foreign operations. Evaluate whether Malaysia is more or less attractive destination for multinational corporations to locate their operations if compared to BRICS emerging economies. Support your evaluation with facts and cite the sources of information. (36 marks) [Total: 60 marks]

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a i Assuming that the Purchasing Power Parity PPP holds the future spot ... View the full answer