A U.S.-based MNC has a subsidiary in Malaysia that generates substantial net cash inflows denominated in Ringgit Malaysia. Given this information, the MNC would ____ from a ____ of the Ringgit Malaysia
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A U.S.-based MNC has a subsidiary in Malaysia that generates substantial net
benefit; appreciation
not benefit;
benefit; depreciation
not benefit; appreciation
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- What are the relevant cash flows for an international investment:the cash flow produced by the subsidiary in the country whereit operates, or the cash flows in dollars that it sends to its parentcompany?Which cash flows are important for an overseas investment: those generated by the subsidiary in the country in which it operates or those sent to the parent firm in dollars?Which of the following is matter if a U.S. parent firm plans to completely finance the establishment of its British subsidiary with existing funds from retained earnings. The discount rate of the NPV from the project would be affected by ______. A. the parent's cost of capital B. the sales volume of the subsidiary C. the economic conditions D. the cost of borrowing
- Suppose that Salem Co, a U.S.-based MNC that both purchases supplies from Canada and sells exports in Canada, is seeking to measure the economic exposure of its cash flows. Salem wishes to analyze how its cash flows might change under different exchange rates for the Canadian dollar (the only foreign currency in which it deals). Salem estimates it's cash flows from both the U.S., in dollars, and Canada, in Canadian dollars. These figures are summarized in the following table. U.S. Canada Sales -Cost of materials $315 C$5 $45 C$150 -Operating expenses $55 -Interest expenses $5 C$10 Cash flows $210 -$C155 Salem believes that the value of the Canadian dollar will be $0.70, $0.75, or $0.80, and seeks to analyze its cash flows under each of these scenarios. The following table shows Salem's cash flows under each of these exchange rates. For each exchange rate scenario, fill in rows (2), (3), (5), (6), (9), and (10). Finally, fill in the last row for net cash flows in U.S. dollars for each…Explain how a U.S. corporation could hedge net receivables in Malaysian ringgit with a forward contract. Explain how a U.S. corporation could hedge payables in Canadian dollars with a forward contract.A). Why do we need to translate the financial statement of foreign operations? B). Explain the concepts of local currency, functional currency and presentation, orrency with example. K C). How is the profit or loss from translating foreign operations' financial statements from local currency to functional currency treated? D) How are the profit and loss from translating foreign ope ions' financial statements from functional currency to presentation currency treated?
- (b) Kenduri Co is considering whether or not to manage the foreign exchange exposure by using multilateral netting from the UK, with the Sterling Pound (£) as the base currency. Multilateral netting is undertaken in order to show the cash flow transaction. The following cash flows between Kenduri with three subsidiaries; Lakama from United States, Jaia from Canada and Gochiso in Japan. Below are the details of cash flow transactions: Owed by Kenduri Owed to Lakama Jaia Amount US$ 4.5 million CAD 1.1 million Kenduri Kenduri Gochiso JPY 180 million Gochiso Jaia CAD 3.2 million Gochiso Lakama US$ 1.4 million Gochiso Kenduri GBP 25 million Jaia Lakama US$ 1.5 million Jaia Kenduri GBP 40 million Jaia Gochiso JPY 115 million Lakama Gochiso JPY 320 million Lakama GBP 2.1 million Kenduri Jaia Lakama CAD 2.5 million Calculate the impact of undertaking multilateral netting by Kenduri Co and its three subsidiary companies for the cash flows due in three months if the exchange rate is $1.5938/£,…(b) Kenduri Co is considering whether or not to manage the foreign exchange exposure by using multilateral netting from the UK, with the Sterling Pound (£) as the base currency. Multilateral netting is undertaken in order to show the cash flow transaction. The following cash flows between Kenduri with three subsidiaries; Lakama from United States, Jaia from Canada and Gochiso in Japan. Below are the details of cash flow transactions: Owed by Kenduri Owed to Lakama Jaia Amount US$ 4.5 million CAD 1.1 million Kenduri Kenduri Gochiso JPY180 million Gochiso Jaia CAD 3.2 million Gochiso Lakama US$ 1.4 million Gochiso Kenduri GBP 25 million Jaia Lakama US$ 1.5 million Jaia Kenduri GBP 40 million Jaia Gochiso JPY 115 million Lakama Gochiso JPY 320 million Lakama GBP 2.1 million Kenduri Jaia Lakama CAD 2.5 million Calculate the impact of undertaking multilateral netting by Kenduri Co and its three subsidiary companies for the cash flows due in three months if the exchange rate is $1.5938/£,…Which is the most simple way that is able to protect a U.S firm's earnings of its consolidated income statement in the depreciation of euro relative to U.S. dollar? A. Selling euros forward in the foreign exchange market. B. Partner with the local firm of the oversea market. C. Purchasing euros forward in the foreign exchange market. D. Establish a subsidiary in the oversea economy.
- If you are the manager, you should understand which of the operations do not create benefit from depreciation of the firm's local currency. I. Borrowing in a foreign country and converting the funds to the local currency prior to the depreciation. II. Purchasing foreign supplies. III. Investing in foreign bank accounts denominated in foreign currencies prior to depreciation of the local currency. A. I, IV B. II, IV C. I, II D. II, IIIIn an attempt to manage economic exposure, the following are examples of diversifying operating cash flows, EXCEPT: A) Diversification of sales across different countries B) Locating manufacturing facilities is various countries C) Issuing bonds in foreign countries D) Buying raw materials from more than one country PConsider a US-based MNC with a wholly owned Italian subsidiary. Following a depreciation of the dollar against the euro, which of the following conclusions are correct? Group of answer choices a. The cash flow in euros could be altered due a change in the firm's competitive position in the marketplace. b. A given operating cash flow in euros will be converted to a higher US dollar cash flow. c. Both A and B d. None of the above
