QUESTION FIVE $(5)$

Airbus is a leading aircraft manufacturer owned by European Aeronautic Defense and Space Company $($EADs$),$ a global leader in aerospace defense and related services. Having its headquarters in Toulouse, France, it has fully owned subsidiaries in the United States, China, Japan and Middle East. It has its spare part centers in Hamburg, Frankfurt, Washington, Beijing and Singapore, training centers in Toulouse, Miami, Hamburg, and Beijing $($Airbus$,2011).$ The company has $150$ field service offices around the world and employs a total work force of $119,000$ and has presence on every continent $($Airbus$,2011).$

REQUIRED:

a$)$ What additional risks exist for companies like Airbus when trading overseas?

$(10$ Marks$)$

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b$)$ Give reasons why a company may be willing to face the risks of trading overseas.

$(5$ Marks$)$

c$)$ Explain at least FIVE $(5)$ actions that a Multi$-$National Company $($MNC$)$ can take to limit the effects of possible restrictions on the repatriation of profits.

$(10$ Marks$)$

QUESTION THREE

$($a$)$ You are evaluating two similar bonds. Both mature in four years, both have a K$1,000$ par value, and both pay a coupon rate of $10$ percent. However, one bond pays that coupon in annual installments, whereas the other makes semiannual payments. Suppose you require a $10$ percent return on either bond.

Should these bonds sell at identical prices or should one be worth more than the other? What prices do you obtain for these bonds? Can you explain the apparent paradox?

$(10$ marks$)$