Problem 21.1 Pfizer's Foreign-Source Income
Pfizer is a U.S.-based global manufacturer and distributor of a wide array of pharmaceutical products. As
part of the training in its corporate treasury offices, it has its interns build a spreadsheet analysis o
Problem 16.1 Pacific Wietz
Giri Iyer is European analyst and strategist for Tristar Funds, a New York-based mutual fund company. Giri is
currently evaluating the recent performance of shares in Pacific Wietz, a publicly traded specialty chemical
Problem 1.1 Production and Consumption
Comparative Advantage. Problems 1 - 5 illustrate an example of trade induced by comparative advantage. They
assume that China and France each have 1000 production units. With one unit of production (a mix of land, la
Globalization and the Multinational Enterprise
1. Globalization and the MNE. The term globalization has become very widely used in recent years.
How would you define it?
Narayana Murthys quote is a good place to start any discussion of
Problems 1-5 illustrate an example of trade induced by comparative advantage. They assume that China and France
each have 1,000 production units. With one unit of production (a mix of land, labor, capital, and technology), China
Problem 14.1 Window Rock Manufacturing, Inc.
Window Rock Manufacturing, Inc, a U.S. multinational company, has the following debt components in its consolidated capital section. Window
Rock's finance staff estimates their cost of equity to be 20%. Current
Problem 10.1 P & G India
Proctor and Gambles affiliate in India, P & G India, procures much of its toiletries product line from a Japanese company. Because of the
shortage of working capital in India, payment terms by Indian importers are typically 180 da
Problem 6.1 - 6.5 The Latin American Big Mac Index: Historical
This textbook has used the Economist magazine's Big Mac Index for many years and many editions. Below are the Big Mac prices and
actual exchange rates for select Latin American countries as pr
Foreign Currency Derivatives
1. Options versus Futures. Explain the difference between foreign currency options and futures and
when either might be most appropriately used.
An option is a contract giving the buyer the right but not th
Problem 7.1 Starbucks in Croatia
Starbucks opened its first store in Zagreb, Croatia in October 2010. The price of a tall vanilla latte
in Zagreb is 25.70kn. In New York City, the price of a tall vanilla latte is $2.65. The exchange
rate bewteen Croatian
Problem 8.2 Sallie Schnudel
Sallie Schnudel trades currencies for Keystone Funds in Jakarta. She focuses nearly all of her time and attention on the
U.S. dollar/Singapore dollar ($/S$) cross-rate. The current spot rate is $0.6000/S$. After considerable st
474's Current Account
Use the following 474ian balance of payments data from the IMF (all items are for the current account) to answer questions 1 through 5.
What is 474's balance on goods?
What is 474's balance on services?
What is 474's b
Problem 2.2 Carty's Choices
Brian Carty, a prominent investor, is evaluating investment alternatives.
If he believes an individual equity will rise in price from $59 to $71 in
the coming one-year period, and the share is expected to pay a dividend
Problem 3.1 Gilded Question
Before World War I, $20.67 was needed to buy one ounce of gold. If, at the same time
one ounce of gold could be purchased in France for FF410.00, what was the exchange
rate between French francs and U.S. dollars?
Sourcing Equity Capital Globally
1. Designing a Strategy to Source Equity Globally. Exhibit 13.1 illustrates alternative paths to
globalizing the cost and availability of capital. Identify the specific steps in Exhibit 13.1 that
Global Cost and Availability of Capital
1. Dimensions of the Cost and Availability of Capital. Global integration has given many firms access
to new and cheaper sources of funds beyond those available in their home markets. What are t
1. By Any Other Name. What does the word translation mean? Why is translation exposure sometimes
called accounting exposure?
Translation refers to the process by which the financial statements of separately incorp
1. By Any Other Name. Operating exposure has other names. What are they, and what do the words in
these names suggest about the nature of operating exposure?
Economic exposure emphasizes that the exposure is created
1. Foreign Exchange Exposure. Give a general definition of foreign exchange exposure as it relates
to the operations of a multinational enterprise (MNE).
In its most general sense, foreign exchange exposure is the
Foreign Exchange Rate Determination
1. Term Forecasting. What are the major differences between short-term and long-term forecasts for a
fixed versus floating exchange rate?
Long-run forecasts may be motivated by a mult
International Parity Conditions
1. Purchasing Power Parity. Define the following terms:
a. The law of one price. The law of one prices states that producers prices for goods or services
of identical quality should be the same in differ
The Foreign Exchange Market
1. Definitions. Define the following terms:
a. The foreign exchange market provides the physical and institutional structure through which the
money of one country is exchanged for that of another country, t
The Balance of Payments
1. Balance of Payments Defined. The measurement of all international economic transactions between
the residents of a country and foreign residents is called the balance of payments (BOP). What
The International Monetary System
1. The Gold Standard and the Money Supply. Under the gold standard, all national governments
promised to follow the rules of the game. This meant defending a fixed exchange rate. What did
Financial Goals and Corporate Governance
1. Ownership of the Business. How does ownership alter the goals and governance of a business?
The return to a shareholder in a publicly traded firm combines current income in the form of
Problem 22.1 Asahi-Do, K.K.
Asahi-Do, K.K., the Japanese subsidiary of a U.S. company has 100,000,000 in accounts
receivable for sales billed to customers on terms of 2/30 n/60. Customers usually pay in 30
days. Asahi-Do also has 60,000,000 of accounts pa
Problem 20.1 Indian Motorcycles (A)
Indian Motorcycles exports large-engine motorcycles (greater than 700cc) to Australia and
invoices its customers in U.S. dollars. Sydney Wholesale Imports has purchased $3,000,000 of
merchandise from Indian Motorcycles,
Problem 19.1 Trefica de Honduras
Texas Pacific, a U.S.-based private equity firm, is trying to determine what it should pay for a tool manufacturing firm in Honduras named
Trefica. Texas Pacific estimates that Trefica will generate a free cash flow of 13
Problem 15.1 Chavez S.A.
Chavez S.A., a Venezuelan company, wishes to borrow $8,000,000 for eight weeks.
A rate of 6.250% per annum is quoted by potential lenders in New York, Great
Britain, and Switzerland using, respectively, international, British, and
Problem 12.1 Trident's Cost of Capital
Exhibit 12.2 showed the calculation of Tridents weighted average cost of capital. Assuming that financial
conditions have worsened, and using the following current data, recalculate:
a. Trident's cost of equity