International financial Strategy - Casestudy

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Added on 2021-02-19

International financial Strategy - Casestudy

Added on 2021-02-19

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Table of ContentsINTRODUCTION...........................................................................................................................3PART 1............................................................................................................................................3Evaluation of CAPM along with its assumptions and limitations and Estimation of price usingCAPM..........................................................................................................................................3Estimation of Beta and comments...............................................................................................4Evaluation of DVM along with its assumptions and limitations and Estimation of price usingDVM............................................................................................................................................6Reasons for differences and comments........................................................................................8PART 2............................................................................................................................................8Evaluation of company’s strategy to invest in China in same sector and correlation and co-efficient between China and the UK............................................................................................8Potential challenges for managers when investing in China.....................................................10Consideration of risk diversification..........................................................................................12CONCLUSION..............................................................................................................................12REFERENCES..............................................................................................................................132

International financial Strategy - Casestudy_2

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INTRODUCTIONInternational financial strategy can be defined as the decisions that are formulated by suchcompanies that are executing their business at international level and willing to acquire higherprofits in future. With the help of it all of them try to find such ways in which business can attaingrowth and get developed in future. It is mainly used by such companies to plan commercialtransactions that are taking place between organisations executing business in different countries(Blecker, 2016). Main goal of it is to increase profits so that monetary resources to run businesscan be enhanced. It guides managers to take appropriate decisions for business so thatprofitability can be maximised and business can be developed. Organisation which is selected forthis project is Marks and Spencer. It is one of the largest retailers in United Kingdom. It wasfounded in year 1884 by Thomas Spencer and Michael Marks. It is mainly established in UK andoperating its business all around the world. This report covers various topics such as evaluation,limitation, assumptions, calculation and estimation of CAPM and DVM. Along with this,evaluation of company’s strategy, potential challenges for managers, risk diversification etc. arealso covered under this project.PART 1Evaluation of CAPM along with its assumptions and limitations and Estimation of price usingCAPMCAPM (Capital Asset Pricing Model): It is a financial model which is used by managersin business entities for the purpose of determining the required rate of return of a financial assetso that decision regarding adding that asset to portfolio can be formulated. With the help of itmanagers in Marks and Spencer can analyse relation between expected return and systematic riskof a particular asset (Annual Report of M&S, 2018). Formula of it is as follows:Formula : ERi = Rf + Bi (ERm - Rf)ERi = Expected Return of investmentRf = Risk free rateBi = Beta of the investmentERm =Expected Return of MarketERm - Rf = Market risk premiumERi = Rf + Bi (ERm – Rf)4

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International financial Strategy - Casestudy