In the current scenario, a UK-based corporation namely as Mega Company is exporting a machine to the US-based corporation, Bestway Enterprises for a sum of $500,000. This receipt is going to be received by Mega Corporation after around 3 months. So, Mega Corporation here faces a risk of strengthening the domestic currency which is Pound Sterling against US Dollars. If Pound Sterling appreciates, then there will be less amount of money would be converted in to Pound Sterling from US Dollars. So in order to combat with the exchange rate fluctuations, there are different sorts of strategies available, called as hedging strategies which are used by the corporations to reduce the element of exchange rate volatilities. Some of these strategies are listed as under: Money Market Operations Lead Payments Netting Forward Contracts Future Contracts Options In the following discussion, only Forward Contracts and Future Contracts are discussed in detail: Forwards Contracts Forward Contracts are the ones in which an agreement is made between the parties regarding the future exchange rate. The future exchange rate is set now and the parties to contract will deliver the currencies at the rate determined at the time of contract. ...Show more
Question 1 The biggest threat that arises in the business of imports and exports is about the volatility of the exchange rates. The companies that import goods have the risk of the depreciation of their home currency, for that case they have to pay more to buy thee foreign currency because the ultimate payment has to be made in the foreign currency…
Starting a new venture or moving to another country is not an easy task because the investor or the company not only has to face usual risk that a business faces but it has to deal with the exchange rate risk or translation risk (Gitman, 2003).
This means, buying the inventory directly from the manufacturer and then distributing it to various outlets in the city at a margin. The business therefore plays an intermediary role by providing a channel for distributing the manufacturer’s products to the consumers.
) Cost of Debt (kd) Bank Overdraft 169,800,000 6% Redeemable bond 310,200,000 3.52% Calculation of Cost of debt (kd) Table 2 Current Market Value (94) Coupon Payment Dec-11 4 Dec-12 4 Dec-13 4 Dec-14 4 Dec-15 4 Redemption at premium 102 IRR (Pre tax) 4.88% IRR (Post tax) 3.52% Weighted Average Cost Of Capital Table 3 Instrument Market Value (?
This is indicative of the fact that nations today, are a part of an increasingly wider marketplace, and their interdependence on one another plays a key role in the development of their regional as well as international economy. These
Separate accounting records are kept for each separate company, but not for the consolidated entity (Copeland, 2008). To determine the consolidated amounts, the amounts for the individual affiliated companies are added together. Elimination entries are made to remove the effects of inter-company transactions.
EVA is one of those change mechanisms that has been initiated by the CEO of Asahi glass with an aim to transform the traditional Japanese company into a global firm. The other reforms brought about by the leader include a corporate reorganization into worldwide
b. Suppose that the United States is on a bimetallic standard at $35 to one ounce of gold and $3 for one ounce of silver. If new silver mines open and flood the market with silver, the two metals will circulate as before in the US since citizens could exchange