Briefly discuss possible advantages to a multinational company from using a holding company based in a tax
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Kato company needs one year loan of about Yens 80M. The company can borrow in Japan at 10.8% pa but is considering taking out sterling loan which could cost 6.56%. The current spot exchange rate is Yen/£ 5.1503. The company decides to borrow 40 M at 6.56% pa. Converting at the spot rate, this will provide Yen 51.503 million. Interest will be paid at the end of the year along with the repayment of loan and principal Assuming the exchange rate moves in line with interest rate parity, Required i. Show the Yen values of the interest paid and the repayment of loan principal. (5 marks) ii. Compute the effective interest rate paid on the loan (2marks) Kato company needs one year loan of about Yens 80M. The company can borrow in Japan at 10.8% pa but is considering taking out sterling loan which could cost 6.56%. The current spot exchange rate is Yen/£ 5.1503. The company decides to borrow 40 M at 6.56% pa. Converting at the spot rate, this will provide Yen 51.503 million. Interest will be paid at the end of the year along with the repayment of loan and principal Assuming the exchange rate moves in line with interest rate parity, Required i. Show the Yen values of the interest paid and the repayment of loan principal. (5 marks) ii. Compute the effective interest rate paid on the loan (2marks)
Expert Answer:
Answer rating: 100% (QA)
SOLUTION A holding company is a type of company that owns a controlling interest in other companies usually for the purpose of managing and controlling assets or investments A multinational company ma... View the full answer
Related Book For
Posted Date:
Students also viewed these finance questions
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
KYC's stock price can go up by 15 percent every year, or down by 10 percent. Both outcomes are equally likely. The risk free rate is 5 percent, and the current stock price of KYC is 100. (a) Price a...
-
Modify HashST to use a resizing array so that the average length of the list associated with each hash value is between 1 and 8 .
-
In a Millikan oil-drop experiment a uniform electric fleld of 1.92 x 105 N/C is maintained in the region between two plates separated by 1.50 cm. Find the potential difference between the plates.
-
Which of the following would not be considered an attestation engagement under SSAE No. 1, "Attestation Standards"? a. A compilation of financial statements. b. A letter for an underwriter. c. A...
-
Loris Catering, Inc., purchased $400 of supplies on account. The journal entry to record this transaction is denoted by which of the following? DATE ACCOUNTS POST REF. DR. CR. a. Inventory 400...
-
All of us come into contact with distributed systems almost every day, even if it is only while shopping at Walmart or Sears. Describe a distributed system with which you have come in contact. In...
-
For the year ended December 31, 2024, Norstar Industries reported net income of $900,000. At January 1, 2024, the company had 700,000 common shares outstanding. The following changes in the number of...
-
Paul Poti, is the sole proprietor of Poti Enterprises, a small retail shop selling widgets located in Edmonton, AB. The shop has been in operation for several years. Paul provides you with the...
-
A couple is sitting in the middle of an auditorium before the play starts. Even though everyone in the auditorium is talking, they can only hear each other's conversation. What is this an example of?
-
Identify the different pricing strategies and objectives that influence decisions about pricing products in global markets.
-
How does managements orientation (e.g., ethnocentric, polycentric, or regiocentric) correlate with decisions about sales force nationality? Which other factors affect sales force composition?
-
What is the difference between a consumer sales promotion and a trade sales promotion? Describe the various types and purposes of using coupons, like free-standing inserts and on-pack coupons.
-
Tea has been in the limelight recently thanks to increasing global demand, especially in emerging economies like China and India. China, India, Kenya, and Sri Lanka are some of the largest producers...
-
Explain the structure of the advertising industry, and describe the difference between agency holding companies and individual agency brands.
-
The internet and modern technology have increased the potential for business tort and criminal liability by creating a multitude of cybersecurity problems. What can be done to prevent this from...
-
Software Solution is family-owned business that has been in operation for more than 15 year. The board of directors is comprised of mainly family members, plus a few professionals such as an...
-
In 2011, Microsoft acquired Skype (based in Luxembourg) for about $8.5 billion. Write a short essay that describes the general process that Microsoft would have used to determine how much it was...
-
Some U.S.-based MNCs have been maintaining a very large amount of cash in foreign countries, because they would be subject to a corporate income tax on these funds if they were remitted to the...
-
1that interest rate parity exists. Does the forward rate quoted today for the Australian dollar exhibit a premium, or a discount, or does your answer vary with specific conditions? Briefly explain.
-
It was reported in your department meeting that over the past year your hospital decreased the number of employees by four percent. Last year there were 389 people employed; how many are employed...
-
A physician on your staff performed 44 cardiac catheterizations last month. 34 of those treated were male. What is the ratio of male patients to female patients who had cardiac catheterizations? What...
-
Your beginning salary as an analyst in the HIM department is $14.50 per hour. You are due to receive a 3.4 percent cost-of-living raise in your next paycheck. Your performance evaluation is coming up...
Study smarter with the SolutionInn App