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    Int'l Finance Assignment1

    Uploaded by

    Kal Kal
    1. The document is an assignment from Unity University's Department of Accounting and Finance for an International Finance course. It contains 5 questions relating to topics in the course such as subsidiary vs parent perspectives, multinational capital budgeting, exchange rates, and a case study about a company considering expanding production to Mexico. 2. The questions require discussing factors that create differences in cash flows between subsidiaries and parents, important inputs for multinational capital budgeting, how a stronger dollar could impact trade deficits, and situations where floating exchange rates may not correct trade imbalances. 3. For the case study, students are asked to offer their opinion on the logic of a consultant's three reasons

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    Int'l Finance Assignment1

    Uploaded by

    Kal Kal
    10 views2 pages
    1. The document is an assignment from Unity University's Department of Accounting and Finance for an International Finance course. It contains 5 questions relating to topics in the course such as subsidiary vs parent perspectives, multinational capital budgeting, exchange rates, and a case study about a company considering expanding production to Mexico. 2. The questions require discussing factors that create differences in cash flows between subsidiaries and parents, important inputs for multinational capital budgeting, how a stronger dollar could impact trade deficits, and situations where floating exchange rates may not correct trade imbalances. 3. For the case study, students are asked to offer their opinion on the logic of a consultant's three reasons

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    1. The document is an assignment from Unity University's Department of Accounting and Finance for an International Finance course. It contains 5 questions relating to topics in the course such as subsidiary vs parent perspectives, multinational capital budgeting, exchange rates, and a case study about a company considering expanding production to Mexico. 2. The questions require discussing factors that create differences in cash flows between subsidiaries and parents, important inputs for multinational capital budgeting, how a stronger dollar could impact trade deficits, and situations where floating exchange rates may not correct trade imbalances. 3. For the case study, students are asked to offer their opinion on the logic of a consultant's three reasons

    Copyright:

    © All Rights Reserved
    Download as RTF, PDF, TXT or read online from Scribd
    Download as rtf, pdf, or txt
    10 views2 pages

    Int'l Finance Assignment1

    Uploaded by

    Kal Kal
    1. The document is an assignment from Unity University's Department of Accounting and Finance for an International Finance course. It contains 5 questions relating to topics in the course such as subsidiary vs parent perspectives, multinational capital budgeting, exchange rates, and a case study about a company considering expanding production to Mexico. 2. The questions require discussing factors that create differences in cash flows between subsidiaries and parents, important inputs for multinational capital budgeting, how a stronger dollar could impact trade deficits, and situations where floating exchange rates may not correct trade imbalances. 3. For the case study, students are asked to offer their opinion on the logic of a consultant's three reasons

    Copyright:

    © All Rights Reserved
    Download as RTF, PDF, TXT or read online from Scribd
    Download as rtf, pdf, or txt
    of 2

    Unity University

    Department of Accounting and Finance


    Assignment for International Finance (3rd Year)

    1. Subsidiary Vs Parent Perspective: Some projects might be feasible for a subsidiary but
    not feasible for the parent, as net after-tax cash inflows to the subsidiary can differ
    substantially from those to the parent. Such differences in cash flows between the
    subsidiary and the parent can be due to several factors. Discuss at least three such factors
    (check page 437 of the book)
    2. Discuss some of the most important inputs that are necessary for multinational capital
    budgeting. (check page 439)
    3. Explain how a stronger dollar could enlarge the U.S. balance-of-trade deficit (refer
    chapter 2)
    4. A floating exchange rate could possibly correct any international trade imbalances. But,
    there are situations where this may not work. Give some examples of such a situations.
    (refer chapter 2)
    5. Fort Worth, Inc., specializes in manufacturing some basic parts for sports utility vehicles
    (SUVs) that are produced and sold in the United States. Its main advantage in the United
    States is that its production is efficient and less costly than that of some other unionized
    manufacturers. It has a substantial market share in the United States. Its manufacturing
    process is labor intensive. It pays relatively low wages compared to U.S. competitors, but
    has guaranteed the local workers that their positions will not be eliminated for the next 30
    years. It hired a consultant to determine whether it should set up a subsidiary in Mexico,
    where the parts would be produced. The consultant suggested that Fort Worth should
    expand for the following reasons.
    a. Imperfect Markets Theory: Fort Worth cannot easily transfer workers to Mexico,
    but it can establish a subsidiary there in order to penetrate a new market
    b. Product Cycle Theory: Fort Worth has been successful in the United States. It has
    limited growth opportunities because it already controls much of the U.S. market for
    the parts it produces. Thus, the natural next step is to conduct the same business in a
    foreign country.
    c. Exchange Rate Risk: The exchange rate of the peso has weakened recently, so this
    would allow Fort Worth to build a plant at a very low cost (by exchanging dollars for
    the cheap pesos to build the plant)
    Required: Offer your opinion on whether the consultant’s reasons are logical. Briefly
    explain why and why not.

    Not more than 4 pages

    See chapter 14 of the book sent to you for question number 1 & 2

    N.B. Copying answers from other students entail penalty (applies to both students)

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