国际财务管理答案.doc

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1、Solutions for International Corporate FinanceChapter 12Chapter 24Chapter 36Chapter 48Chapter 512Chapter 614Chapter 716Chapter 818Chapter 921Chapter 1023Chapter 1126Chapter 1229Chapter 15. International Business Methods. Snyder Golf Co., a U.S. firm that sells high-quality golf clubs in the U.S., wan

2、ts to expand internationally by selling the same golf clubs in Brazil. a. Describe the tradeoffs that are involved for each method (such as exporting, direct foreign investment, etc.) that Snyder could use to achieve its goal. ANSWER: Snyder can export the clubs, but the transportation expenses may

3、be high. If could establish a subsidiary in Brazil to produce and sell the clubs, but this may require a large investment of funds. It could use licensing, in which it specifies to a Brazilian firm how to produce the clubs. In this way, it does not have to establish its own subsidiary there. b. Whic

4、h method would you recommend for this firm? Justify your recommendation.ANSWER: If the amount of golf clubs to be sold in Brazil is small, it may decide to export. However, if the expected sales level is high, it may benefit from licensing. If it is confident that the expected sales level will remai

5、n high, it may be willing to establish a subsidiary. The wages are lower in Brazil, and the large investment needed to establish a subsidiary may be worthwhile. 8. Comparative Advantage.a. Explain how the theory of comparative advantage relates to the need for international business.ANSWER: The theo

6、ry of comparative advantage implies that countries should specialize in production, thereby relying on other countries for some products. Consequently, there is a need for international business. b. Explain how the product cycle theory relates to the growth of an MNC.ANSWER: The product cycle theory

7、 suggests that at some point in time, the firm will attempt to capitalize on its perceived advantages in markets other than where it was initially established.10. Valuation of Wal-Marts International Business. In addition to all of its stores in the U.S., Wal-Mart has 11 stores in Argentina, 24 stor

8、es in Brazil, 214 stores in Canada, 29 stores in China, 92 stores in Germany, 15 stores in South Korea, 611 stores in Mexico, and 261 stores in the U.K. Consider the value of Wal-Mart as being composed of two parts, a U.S. part (due to business in the U.S.) and a non-U.S. part (due to business in ot

9、her countries). Explain how to determine the present value (in dollars) of the non-U.S. part assuming that you had access to all the details of Wal-Mart businesses outside the U.S.ANSWER: The non-U.S. part can be measured as the present value of future dollar cash flows resulting from the non-U.S. b

10、usinesses. Based on recent earnings data for each store and applying an expected growth rate, you can estimate the remitted earnings that will come from each country in each year in the future. You can convert those cash flows to dollars using a forecasted exchange rate per year. Determine the prese

11、nt value of cash flows of all stores within one country. Then repeat the process for other countries. Then add up all the present values that you estimated to derive a consolidated present value of all non-U.S. subsidiaries. 15. International Joint Venture. Anheuser-Busch, the producer of Budweiser

12、and other beers, has recently expanded into Japan by engaging in a joint venture with Kirin Brewery, the largest brewery in Japan. The joint venture enables Anheuser-Busch to have its beer distributed through Kirins distribution channels in Japan. In addition, it can utilize Kirins facilities to pro

13、duce beer that will be sold locally. In return, Anheuser-Busch provides information about the American beer market to Kirin. a. Explain how the joint venture can enable Anheuser-Busch to achieve its objective of maximizing shareholder wealth.ANSWER: The joint venture creates a way for Anheuser-Busch

14、 to distribute Budweiser throughout Japan. It enables Anheuser-Busch to penetrate the Japanese market without requiring a substantial investment in Japan. b. Explain how the joint venture can limit the risk of the international business.ANSWER: The joint venture has limited risk because Anheuser-Bus

15、ch does not need to establish its own distribution network in Japan. Thus, Anheuser-Busch may be able to use a smaller investment for the international business, and there is a higher probability that the international business will be successful. c. Many international joint ventures are intended to

16、 circumvent barriers that normally prevent foreign competition. What barrier in Japan is Anheuser-Busch circumventing as a result of the joint venture? What barrier in the United States is Kirin circumventing as a result of the joint venture? ANSWER: Anheuser-Busch is able to benefit from Kirins dis

17、tribution system in Japan, which would not normally be so accessible. Kirin is able to learn more about how Anheuser-Busch expanded its product across numerous countries, and therefore breaks through an “information” barrier. d. Explain how Anheuser-Busch could lose some of its market share in count

18、ries outside Japan as a result of this particular joint venture.ANSWER: Anheuser-Busch could lose some of its market share to Kirin as a result of explaining its worldwide expansion strategies to Kirin. However, it appears that Anheuser-Busch expects the potential benefits of the joint venture to ou

19、tweigh any potential adverse effects.24. Global Competition. Explain why more standardized product specifications across countries can increase global competition.ANSWER: Standardized product specifications allow firms to more easily expand their business across other countries, which increases glob

20、al competition.Chapter 24. Free Trade. There has been considerable momentum to reduce or remove trade barriers in an effort to achieve “free trade.” Yet, one disgruntled executive of an exporting firm stated, “Free trade is not conceivable; we are always at the mercy of the exchange rate. Any countr

21、y can use this mechanism to impose trade barriers.” What does this statement mean?ANSWER: This statement implies that even if there were no explicit barriers, a government could attempt to manipulate exchange rates to a level that would effectively reduce foreign competition. For example, a U.S. fir

22、m may be discouraged from attempting to export to Japan if the value of the dollar is very high against the yen. The prices of the U.S. goods from the Japanese perspective are too high because of the strong dollar. The reverse situation could also be possible in which a Japanese exporting firm is pr

23、iced out of the U.S. market because of a strong yen (weak dollar). Answer is based on opinion. 8. International Investments. In recent years many U.S.-based MNCs have increased their investments in foreign securities, which are not as susceptible to negative shocks in the U.S. market. Also, when MNC

24、s believe that U.S. securities are overvalued, they can pursue non-U.S. securities that are driven by a different market. Moreover, in periods of low U.S. interest rates, U.S. corporations tend to seek investments in foreign securities. In general, the flow of funds into foreign countries tends to d

25、ecline when U.S. investors anticipate a strong dollar. a. Explain how expectations of a strong dollar can affect the tendency of U.S. investors to invest abroad.ANSWER: A weak dollar would discourage U.S. investors from investing abroad. It can cause the investors to purchase foreign currency (when

26、investing) at a higher exchange rate than the exchange rate at which they would sell the currency (when the investment is liquidated).b. Explain how low U.S. interest rates can affect the tendency of U.S.-based MNCs to invest abroad.ANSWER: Low U.S. interest rates can encourage U.S.-based MNCs to in

27、vest abroad, as investors seek higher returns on their investment than they can earn in the U.S.c. In general terms, what is the attraction of foreign investments to U.S. investors?ANSWER: The main attraction is potentially higher returns. The international stocks can outperform U.S. stocks, and int

28、ernational bonds can outperform U.S. bonds. However, there is no guarantee that the returns on international investments will be so favorable. Some investors may also pursue international investments to diversify their investment portfolio, which can possibly reduce risk.10. Exchange Rate Effects on

29、 Trade.a. Explain why a stronger dollar could enlarge the U.S. balance of trade deficit. Explain why a weaker dollar could affect the U.S. balance of trade deficit.ANSWER: A stronger dollar makes U.S. exports more expensive to importers and may reduce imports. It makes U.S. imports cheap and may inc

30、rease U.S. imports. A weaker home currency increases the prices of imports purchased by the home country and reduces the prices paid by foreign businesses for the home countrys exports. This should cause a decrease in the home countrys demand for imports and an increase in the foreign demand for the

31、 home countrys exports, and therefore increase the current account. However, this relationship can be distorted by other factors. b. It is sometimes suggested that a floating exchange rate will adjust to reduce or eliminate any current account deficit. Explain why this adjustment would occur.ANSWER:

32、 A current account deficit reflects a net sale of the home currency in exchange for other currencies. This places downward pressure on that home currencys value. If the currency weakens, it will reduce the home demand for foreign goods (since goods will now be more expensive), and will increase the

33、home export volume (since exports will appear cheaper to foreign countries). c. Why does the exchange rate not always adjust to a current account deficit?ANSWER: In some cases, the home currency will remain strong even though a current account deficit exists, since other factors (such as internation

34、al capital flows) can offset the forces placed on the currency by the current account.13. Effects of Tariffs. Assume a simple world in which the U.S. exports soft drinks and beer to France and imports wine from France. If the U.S. imposes large tariffs on the French wine, explain the likely impact o

35、n the values of the U.S. beverage firms, U.S. wine producers, the French beverage firms, and the French wine producers. ANSWER: The U.S. wine producers benefit from the U.S. tariffs, while the French wine producers are adversely affected. The French government would likely retaliate by imposing tari

36、ffs on the U.S. beverage firms, which would adversely affect their value. The French beverage firms would benefit. 15. Demand for Exports. A relatively small U.S. balance of trade deficit is commonly attributed to a strong demand for U.S. exports. What do you think is the underlying reason for the s

37、trong demand for U.S. exports?ANSWER: The strong demand for U.S. exports is commonly attributed to strong foreign economies or to a weak dollar.Chapter 35. International Financial Markets. Recently, Wal-Mart established two retail outlets in the city of Shenzhen, China, which has a population of 3.7

38、 million. These outlets are massive and contain products purchased locally as well as imports. As Wal-Mart generates earnings beyond what it needs in Shenzhen, it may remit those earnings back to the United States. Wal-Mart is likely to build additional outlets in Shenzhen or in other Chinese cities

39、 in the future. a. Explain how the Wal-Mart outlets in China would use the spot market in foreign exchange. ANSWER: The Wal-Mart stores in China need other currencies to buy products from other countries, and must convert the Chinese currency (yuan) into the other currencies in the spot market to pu

40、rchase these products. They also could use the spot market to convert excess earnings denominated in yuan into dollars, which would be remitted to the U.S. parent. b. Explain how Wal-Mart might utilize the international money market when it is establishing other Wal-Mart stores in Asia.ANSWER: Wal-M

41、art may need to maintain some deposits in the Eurocurrency market that can be used (when needed) to support the growth of Wal-Mart stores in various foreign markets. When some Wal-Mart stores in foreign markets need funds, they borrow from banks in the Eurocurrency market. Thus, the Eurocurrency mar

42、ket serves as a deposit or lending source for Wal-Mart and other MNCs on a short-term basis. c. Explain how Wal-Mart could use the international bond market to finance the establishment of new outlets in foreign markets.ANSWER: Wal-Mart could issue bonds in the Eurobond market to generate funds need

43、ed to establish new outlets. The bonds may be denominated in the currency that is needed; then, once the stores are established, some of the cash flows generated by those stores could be used to pay interest on the bonds.11. Foreign Exchange. You just came back from Canada, where the Canadian dollar

44、 was worth $.70. You still have C$200 from your trip and could exchange them for dollars at the airport, but the airport foreign exchange desk will only buy them for $.60. Next week, you will be going to Mexico and will need pesos. The airport foreign exchange desk will sell you pesos for $.10 per p

45、eso. You met a tourist at the airport who is from Mexico and is on his way to Canada. He is willing to buy your C$200 for 130 pesos. Should you accept the offer or cash the Canadian dollars in at the airport? Explain. ANSWER: Exchange with the tourist. If you exchange the C$ for pesos at the foreign

46、 exchange desk, the cross-rate is $.60/$10 = 6. Thus, the C$200 would be exchanged for 120 pesos (computed as 200 6). If you exchange Canadian dollars for pesos with the tourist, you will receive 130 pesos.15. Exchange Rate Effects on Borrowing. Explain how the appreciation of the Japanese yen again

47、st the U.S. dollar would affect the return to a U.S. firm that borrowed Japanese yen and used the proceeds for a U.S. project.ANSWER: If the Japanese yen appreciates over the borrowing period, this implies that the U.S. firm converted yen to U.S. dollars at a lower exchange rate than the rate at whi

48、ch it paid for yen at the time it would repay the loan. Thus, it is adversely affected by the appreciation. Its cost of borrowing will be higher as a result of this appreciation.20. Interest Rates. Why do interest rates vary among countries? Why are interest rates normally similar for those European

49、 countries that use the euro as their currency? Offer a reason why the government interest rate of one country could be slightly higher than that of the government interest rate of another country, even though the euro is the currency used in both countries. ANSWER: Interest rates in each country are based on the supply of funds and demand for funds for a g