Financial Analysis and Hedging Strategies for Globetel

M1-1160275768
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Contents
Task:................................................................................................................................................3
Q4....................................................................................................................................................3
Q5....................................................................................................................................................4
Q6....................................................................................................................................................5
Q7....................................................................................................................................................6
References.......................................................................................................................................8
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Task:
Q4.
Forecasted Net Cash flow for Globetel
(In Millions)
JPY
80
JPY
85
JPY
90
Sale
s
Australia 100 110 125
Japan 312.5 294.12 277.78
Total 412.50 404.12 402.78
Cost of Material
Japan 200.00 200.00 200.00
Australia 50.00 47.06 44.44
Total 250.00 247.06 244.44
Operating Expenses
Australia Fixed 30.00 30.00 30.00
Australia
Variable (20%
of sales)
82.50 80.82 80.56
Total 112.50 110.82 110.56
Interest Expenses
Australia 20.00 20.00 20.00
Total 20.00 20.00 20.00
Net Cash flow 30.00 26.24 27.78
It can be stated with the help of the income statement that there is the effect of the JPY over the
cash flow. It can be seen that the inflow of JPY is much higher than the Outflow of the JPY due
to which it is affected by the exchange rate. The company can take possible steps to reduce the
exposure by shifting the cost and the expenses to Japan which will not affect the revenue also.
The outflow payment that is being done in Japan will be same as the Inflow payments received
resulting in the balance of amount and reducing the economic exposure.
Q5.
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