International Finance Assignment : Blades Inc
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Added on 2021-04-17
International Finance Assignment : Blades Inc
Added on 2021-04-17
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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.................................................................................................................3Answer to Question 4.................................................................................................................5PART B:.....................................................................................................................................5Answer to question 1..................................................................................................................5Answer to question 2..................................................................................................................8Answer to question 3..................................................................................................................8Reference..................................................................................................................................11Appendix..................................................................................................................................12
INTERNATIONAL FINANCE3Part AAnswer to Question 1 In case the net cash flows that are denominated in the currency of baht are convertedto the dollar then the Blades Inc. will not be subject to the anticipated depreciation in the bahtthat might result into the transformation of baht into smaller amount of dollars. This isbecause of the fact that the higher interest rate prevalent in Thailand suggests uncertainty oftheir economy. Hence, it will be prudent not to invest excess funds of the company at higherinterest rates in Thailand, rather the excess funds should be invested as investments at 8%interest in Australia itself. Answer to Question 2If in case, the generated cash flows from Thailand are put in Thailand as investmentsthen the Blades Inc. will need to have a loan for the extra funds in the Australia for a 10percent interest rate. This additional fund will be necessary in order to support the operationsin Australia. In addition, the Blades will not be capable of making investments of the fundsthat are remitted in the Australia at an 8 percent interest rate (Frieden 2015). If the bahtcurrency decreases in value by 5 percent for the next year as this is presently expected, thenthe Thailand investments is expected to render a return of approximately ((1.15X0.95)-1) 9.25percent.
INTERNATIONAL FINANCE4Answer to Question 3The analysis is provided below between the two option in investment in Thailand andconverting funds immediately. If the Plan 2 is accepted then there will be a gain of$8389001.34.Plan 1: Investment in ThailandParticulars AmountCalculation of revenue denominated in bahtSpeedos price per pair THB 4,594.00 number of pair of speedos180000Revenue in Baht THB 826,920,000.00 Cash Flow available in bahtRevenue in Baht THB 826,920,000.00 Cost of goods sold THB 516,780,000.00 Cash flow available in baht THB 310,140,000.00 Calculation of dollar receipt as baht is converted in dollar in one yearCash flow available in baht THB 310,140,000.00 Interest earned on baht for a one year period (15%) THB 46,521,000.00 The conversion that will be made in one year THB 356,661,000.00 Expected spot rate in one year0.0361Expected dollar receipt in a period of one year $ 12,875,462.10 Plan 2: Convert funds immediatelyParticulars AmountRevenue in Baht THB 826,920,000.00 Cost of goods sold THB (516,780,000.00)Cash flow available in baht THB 310,140,000.00 Current spot rate $ 0.03810 Dollar receipt at current value $ 11,816,334.00 Interest on investment for one year $ 945,306.72 Dollar receipt in one year period $ 12,761,640.72
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