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The San Antonio Pearl Brewery Co. Pearl Brewery of San Antonio, Texas, has received an order for 10,000 cases of Pearl Beer from El Tacante Importers in Caracas, Venezuela. The Chavistas are furious! Beer from the Yankees!?...How could they! Payment to be in Bolivars Fuerte (VEF). The beer will be shipped to El Tacante under the terms of a Letter of Credit issued by the Bank of Caracas on behalf of El Tacante, The letter of credit specifies that the face value of the shipment, VEF 943,931 (Venezuelan Bolivars Fuerte), will be paid according to the following terms after the Bank of Caracas accepts a time draft drawn in accordance with the terms of the letter of credit. Terms: 50% Down-payment at the Spot Rate 50% in 180 Days. The current discount rate in London on 180-day banker's acceptances is 2% per annum, and Pearl's weighted average cost of capital is 12% per annum. The commission for selling a banker's acceptance in the discount market is 1% of the face amount. (a) Would the Pearl Brewery Company gain by holding the acceptance to maturity as compared to discounting the banker's acceptance at once? (b)Does Pearl incur any other risks in this transaction? How might they manage these risks given the information below? (c) Assume that Venezuela charges a duty of 15% on goods imported into Venezuela from the US. The Pearl Brewery Co. in the previous question discovers that it can brew beer in Valencia near Caracas in Venezuela and bypass this 15% value added tax. Read the case and let's discuss the merits of perhaps doing a foreign direct investment in Valencia (suburb of Cararcas). Answer the questions below and provide your evaluation of the case and evidence to support your decisions. Would you want to export or compete by actually brewing the Pearl Beer right there in that market? What would be the pros and cons of such a move? The San Antonio Pearl Brewery Co. Pearl Brewery of San Antonio, Texas, has received an order for 10,000 cases of Pearl Beer from El Tacante Importers in Caracas, Venezuela. The Chavistas are furious! Beer from the Yankees!?...How could they! Payment to be in Bolivars Fuerte (VEF). The beer will be shipped to El Tacante under the terms of a Letter of Credit issued by the Bank of Caracas on behalf of El Tacante, The letter of credit specifies that the face value of the shipment, VEF 943,931 (Venezuelan Bolivars Fuerte), will be paid according to the following terms after the Bank of Caracas accepts a time draft drawn in accordance with the terms of the letter of credit. Terms: 50% Down-payment at the Spot Rate 50% in 180 Days. The current discount rate in London on 180-day banker's acceptances is 2% per annum, and Pearl's weighted average cost of capital is 12% per annum. The commission for selling a banker's acceptance in the discount market is 1% of the face amount. (a) Would the Pearl Brewery Company gain by holding the acceptance to maturity as compared to discounting the banker's acceptance at once? (b)Does Pearl incur any other risks in this transaction? How might they manage these risks given the information below? (c) Assume that Venezuela charges a duty of 15% on goods imported into Venezuela from the US. The Pearl Brewery Co. in the previous question discovers that it can brew beer in Valencia near Caracas in Venezuela and bypass this 15% value added tax. Read the case and let's discuss the merits of perhaps doing a foreign direct investment in Valencia (suburb of Cararcas). Answer the questions below and provide your evaluation of the case and evidence to support your decisions. Would you want to export or compete by actually brewing the Pearl Beer right there in that market? What would be the pros and cons of such a move