Finance Assignment: Bell Beijing Language School Decisions

This assignment solution addresses various financial aspects related to a language school, Bell Beijing, operating in China. It begins by defining corporate control and agency problems, explaining the conflict between managers and shareholders and how to mitigate it. The solution then covers monitoring ongoing operations, including data tracking and employee communication. It analyzes agency problems in a professional work environment and suggests compensation strategies. Additionally, it explores the risks associated with a joint venture, particularly the potential for control issues, and suggests mitigation strategies. The assignment also delves into foreign exchange risk, detailing the impact of currency fluctuations on businesses with international transactions. It further discusses political risks, such as changes in government policies, and factors that could weaken the Chinese Yuan. The solution provides practical hedging strategies using currency futures and options to manage foreign exchange risk, including examples of how these instruments can be used to lock in exchange rates and protect against currency fluctuations. Finally, references for the solution are provided, including journal articles and books.

Answer 1:
Corporate Control of the Business implies the business is particular from the proprietor. The
significant choice of the business would be taken by the administration of the organization
headed by the CEO and material to every one of the divisions of the organization.
Agency problem alludes to irreconcilable situation with respect to supervisor whether to boost
his very own riches or amplify the investors' esteem. Thus, I am amidst this situation. For all
intents and purposes, the value of the organization is controlled by how well it conveys the
profits to the investors. Ricks (2013)
Agency problems emerge because of contention of objectives for firm supervisors and objective
of the proprietors of the organization. Supervisors destinations are by and large to boost their pay
however the target of the organization is to augment the investors' riches.
Answer 2:
For checking a progressing activity the accompanying advances can be embraced:
1. Following Data of Operations (Ringe, 2015)
2. Speak with representatives/worker investment
3. Contrast real execution and arranged execution
Before taking up the procedure the supervisory crew ought to have an estimation of the yield and
the procedure included.
Answer 3

Agency problem in expert work environment is named as the beyond reconciliation situation
among executives and the owners of the firm. To oblige agency problem supervisor should
offer that kind of compensation which are associated with the yearly advantage of the
association, along these lines, that agents feel motivated and work to assemble benefits. This is
in light of the fact that the extended advantage results in augmentation of wealth.
Answer 4
The joint venture is in a general sense for getting ready inhabitants. In this the investigation
corridor workplaces are given by the Chinese associate while the guides are from abroad. The
probable risks with this venture are control of the idea of the arrangement, control of the joint
venture the extent that ordinary activities, getting occupants to go to the addresses/trainings,
neighborhood laws and conceivable changes in them concerning development of mentors,
repatriation of offer in the earnings, etc. Ringe (2015). The two joint venture associates ought
to light up obviously spell out will's character running the workplaces to the extent of sorting
out relocation of guides, the workplaces offered to mentors the extent that compensation rates.
Answer 5
At the point when any business chips away at a general reason or in more than one country
with the ultimate objective that it has both outside money receivable and remote cash payable,
such business is said to be impacted by outside money swapping scale advancement. The case
is just the pivot when the business has outside cash receivable which benefits by a climb in
change standard and impacted by a fall. Markowitz (2019)

Answer 6
Political risk implies the modification in the organization procedure. With a modification in
the choice party, the techniques in like manner changes. political risk rises generally by virtue
of outside ventures. the host government may changes its rules and rules as for the remote
hypothesis. Goldstein (2012)
Answer 7
The factors that would debilitate the Chinese Yuan are as per the following:
1. At the point when there is an expanded swelling in China and this will result in a general
devaluation of the cash
2. In case the financing costs are extended in China, this would crumble the Chinese Yuan
further and cripple it
Answer 8
CURRENCY FUTURES FOR HEDGING
In the event that a US organization needs to pay to Chinese organization , state 1 million Yuans
following 90 days:
The US organization ought to go long on Yuan. State current conversion scale 0.054 US dollar
per Chinese Yuan and 90 days future rate is 6.776 S dollar per Chinese Yuan.

The US Company should BUY 1 million Yuan Futures at 6.776 dollar per Yuan and lock the
rate. (Brealey, Myers and Allen, 2013)
In the event that the Value of Yuan goes up , the organization makes benefit in the prospects
contract which helps in the installment at higher rate.
For instance ,if the spot swapping scale following 90 days is 6.88 US dollar per Yuan, the
organization makes benefit of (6.88 - 6.776)*1 million US dollar=$1040
Be that as it may, it should pay its commitment at higher rate of USD 6.88 per Yuan ,making lost
$1000.This misfortune will be balanced from the increase in fates contract.
Switch will be valid if the spot conversion scale is under 6.776 after 90 days.There will be
misfortune on future contract and increase in the genuine installment .as a result, the swapping
scale will be bolted at USD 6.776 per Chinese Yuan.
CURRENCY OPTIONS FOR HEDGING
On the off chance that a US organization needs to pay to Chinese organization , state 1 million
Yuans following 90 days:
State current conversion scale 6.76 US dollar per Chinese Yuan
The US organization can purchase 90 days call alternative on 1 million Chinese Yuan at strike
cost of 6.76 US dollar
This will give the organization right yet no commitment to purchase 1 million Yuans at 6.76
dollar per Yuan following 90 days . The organization should pay a little premium for the
alternative which will be the expense of supporting.

In the event that the rate goes up to state 6.88 USD per Yuan following 90 days , there will be
increase of (6.88-6.76)*1 million=$1200 in the Call alternative
For the installment, the organization will purchase at higher rate which will be balanced by the
Option gain. In this way, the swapping scale of USD 6.76/Yuan will be bolted.
On the off chance that the spot rate falls beneath 6.76 USD per Yuan, there will be no
commitment with respect to the organization to purchase at the more expensive rate of 6.76.
Subsequently , there will be no misfortune on alternative.
The organization will purchase I million Yuan at lower spot rate from the market for the
installment
References
Ricks, M. (2013). A Simpler Approach to Financial Reform. SSRN Electronic Journal.
Markowitz, H. (2019). Proposals Concerning the Current Financial Crisis. Financial Analysts
Journal, 65(1), pp.25-27.
Brealey, R., Myers, S. and Allen, F. (2013). Brealey, Myers, and Allen on Valuation, Capital
Structure, and Agency Issues*. Journal of Applied Corporate Finance, 20(4), pp.49-57.
Ringe, W. (2015). Arbitrage and Competition in Global Financial Regulation The Case for a
Special Resolution Regime. SSRN Electronic Journal.