International Finance Assignment Solved
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Added on 2021-04-21
International Finance Assignment Solved
Added on 2021-04-21
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Running head: INTERNATIONAL FINANCEInternational financeName of the Student:Name of the University:Authors Note:
INTERNATIONAL FINANCE2Table of ContentsPART A:.....................................................................................................................................3Answer to question 1..................................................................................................................3Answer to question 2..................................................................................................................3Answer to question 3..................................................................................................................4Answer to question 4..................................................................................................................5PART B:.....................................................................................................................................5Answer to question 1..................................................................................................................5Answer to question 2..................................................................................................................8Answer to question 3..................................................................................................................8Reference..................................................................................................................................10
INTERNATIONAL FINANCE3PART A:Answer to question 1. There are different rates of returns prevailing I the two countries the company sderiving its revenue from i.e. Thailand and Australia. In Thailand the company is getting aninterest rate of 15% whereas in Australia the company is getting a return of 8% on itsinvestments. If a comparison is based only based on the return percent that the company isgetting from the countries clearly the excess funds received from Thailand must be investedback in Thailand owing to its higher interest rates1. But, the higher interest rates also indicatethe uncertainty in the economy of the country and hence the possibility of depreciation of itscurrency Baht in the near future. Hence, the company must remit the excess funds back toAustralia even if the return on investment is low. This will prevent the company from gettinglower amounts of Australian dollars in exchange of same amount of Baht2.Answer to question 2. The requirement of additional funds by the company for its operations in Australiacan be fulfilled either by remitting the excess funds it has earned in Thailand or by raisingdebt back in Australia at an interest rate of 10%. The other factor that must be considered inthis case is that if the value of Baht currency gets depreciated by 5% then the returns accruingto the company will reduce to 9.25%3. Therefore, it will be reasonable to remit the excessfunds earned in Thailand back to Australia. 1Becker, Johannes, E. Reimer, and A. Rust.Klaus Vogel on Double Taxation Conventions. Kluwer LawInternational, 2015.2McDaniel, Paul R., James R. Repetti, and Diane M. Ring.Aspen Student Treatise for Introduction To UnitedStates International Taxation. Wolters Kluwer Law & Business, 2014.3Graetz, Michael J. "Follow the Money: Essays on International Taxation-Introduction." (2016).
INTERNATIONAL FINANCE4Answer to question 3.Particulars AmountCalculation of revenue denominated in bahtSpeedos price per pair4,594.00THB number of pair of speedos180000Revenue in Baht826,920,000.00THB Cash Flow available in bahtRevenue in Baht826,920,000.00THB Cost of goods sold516,780,000.00THB Cash flow available in baht310,140,000.00THB Calculation of dollar receipt as baht is converted in dollar in one yearCash flow available in baht310,140,000.00THB Interest earned on baht for a one year period (15%)46,521,000.00THB The conversion that will be made in one year356,661,000.00THB Expected spot rate in one year0.0361Expected dollar receipt in a period of one year12,875,462.10$ Plan 1: Investment in ThilandParticulars AmountRevenue in Baht826,920,000.00THB Cost of goods sold(516,780,000.00)THB Cash flow available in baht310,140,000.00THB Current spot rate0.03810$ Dollar receipt at current value11,816,334.00000$ Interest on investnent for one year945,306.72000$ Dollar receipt in one year period12,761,640.72$ Plan 2: Convert funds immediatelyPlan 112,875,462.10$ Plan 212,761,640.72$ Difference113,821.38$ Comparision of the two PlanThe above charts show the comparison between the options that is available to thecompany with respect to the excess funds received from Thailand. The company can either
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