Vintnor

Unit 9 Assignment 1

List six major factors that distinguish financial management in firms operating entirely within a single country from those that operate in several different countries. What are some of the common barriers to entry for a firm entering a new country for business? How does this vary from country to country?

Unit 9 Assignment 2

Complete the following problems from your textbook:

· Page 696–697: 19-8, 19-13, and 19-14.

19-8 CROSS RATES Suppose the exchange rate between the U.S. dollar and the Swedish krona was 7.97 krona = $1, and the exchange rate between the dollar and the British pound was £1 = $1.29. What would be the exchange rate between Swedish kronas and pounds?

19-13 SPOT AND FORWARD RATES Arvin Australian Imports has agreed to purchase 15,000 cases of Australian wine for 4 million Australian dollars at today’s spot rate. The firm’s financial manager, Sarah Vintnor, has noted the following current spot and forward rates:

U.S. Dollar/Australian Dollar

Australian Dollar/U.S. Dollar

Spot

0.7930

1.2610

30-day forward

0.7927

1.2615

90-day forward

0.7921

1.2625

180-day forward

0.7911

1.2640

On the same day, Vintnor agrees to purchase 15,000 more cases of wine in 3 months at the same price of 4 million Australian dollars.

a. What is the price of the wine in U.S. dollars if it is purchased at today’s spot rate?

b. What is the cost in U.S. dollars of the second 15,000 cases if payment is made in 90 days and the spot rate at that time equals today’s 90-day forward rate?

c. If the exchange rate for the Australian dollar is 1.20 to $1 in 90 days, how much will Vintnor have to pay for the wine (in U.S. dollars)?

19-14 EXCHANGE GAINS AND LOSSES You are the vice president of Worldwide InfoXchange, headquartered in Minneapolis, Minnesota. All shareholders of the firm live in the United States. Earlier this month you obtained a loan of 10 million Canadian dollars from a bank in Toronto to finance the construction of a new plant in Montreal. At the time the loan was received, the exchange rate was $0.81 to the Canadian dollar. By the end of the month, it has unexpectedly dropped to $0.75. Has your company made a gain or a loss as a result, and by how much?

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