Note: write in words please

Question B3 ATC is a UK-based manufacturer of precision engineering instruments. It both exporting to and importing from Philippine, the business incurs nearly 5% of its costs of goods and generate 20% of its revenue in Philippine. The company does not have subsidiary in Philippine but works with a local retailer under a three year fixed price (in peso) export agreement. ATC is considering expand its business in Philippine. However, recently, the economy in Philippine tends to be volatile, the inflation and interest rate of peso are keep increasing. ATC is concerning it may affect the company's financial performance and the future development. As ATC's financial analyst, you need to provide a report that will address the following key issues. Required: a) Explain the relationship between the exchange rate and relative inflation levels of the UK and Philippine. How will this relationship affect ATC's revenue and costs given that peso is free floating, what is the net effect on the company? (8 marks) b) What would be the expected change of pound-peso exchange rate according to PPP and International Fisher Effect (IFE) given the high level of interest rates in Philippine? (4 marks) c) What factors affecting the holding of purchasing power parity (PPP) in the short run between UK pound and Philippine peso? Would PPP hold better if the two countries negotiate trade deals under which they commit to buy and sale a fixed amount of goods each year? Please explain. (8 marks) d) Based on ATC's current business and its future plan in Philippine, should the company concern about the impact arises from the changes of exchange rate? If yes, what would be your suggestions? (8 marks) Question B3 ATC is a UK-based manufacturer of precision engineering instruments. It both exporting to and importing from Philippine, the business incurs nearly 5% of its costs of goods and generate 20% of its revenue in Philippine. The company does not have subsidiary in Philippine but works with a local retailer under a three year fixed price (in peso) export agreement. ATC is considering expand its business in Philippine. However, recently, the economy in Philippine tends to be volatile, the inflation and interest rate of peso are keep increasing. ATC is concerning it may affect the company's financial performance and the future development. As ATC's financial analyst, you need to provide a report that will address the following key issues. Required: a) Explain the relationship between the exchange rate and relative inflation levels of the UK and Philippine. How will this relationship affect ATC's revenue and costs given that peso is free floating, what is the net effect on the company? (8 marks) b) What would be the expected change of pound-peso exchange rate according to PPP and International Fisher Effect (IFE) given the high level of interest rates in Philippine? (4 marks) c) What factors affecting the holding of purchasing power parity (PPP) in the short run between UK pound and Philippine peso? Would PPP hold better if the two countries negotiate trade deals under which they commit to buy and sale a fixed amount of goods each year? Please explain. (8 marks) d) Based on ATC's current business and its future plan in Philippine, should the company concern about the impact arises from the changes of exchange rate? If yes, what would be your suggestions? (8 marks)