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Mercedes Benz & Toyota Motor Corp - Describe the companies
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Added on 2020-05-28
Mercedes Benz & Toyota Motor Corp - Describe the companies
Added on 2020-05-28
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Mercedes Benz & Toyota Motor Corp. 1MERCEDES BENZ & TOYOTA MOTOR CORP.By (Student’s Name)Professor’s NameCollegeCourseDate
Mercedes Benz & Toyota Motor Corp. 2MERCEDES BENZ & TOYOTA MOTOR CORP.1.Describe the companies Mercedes Benz is an international automobile marque a well as a department of Daimler AG. Itis a famous brand for luxury vehicles, buses, coaches, and Lorries. It remains one of the highlycelebrated names amongst the Luxury Automobile brands globally. It has been around for over100 years. Currently, operations are done by Daimler-Benz. It has headquarter in Stuttgart. Toyota Motor Corp. is a Japanese manufacturer of automotive. It has its headquarter located inToyota, Aichi, Japan. The company designs, manufactures, assembles as well as sells vehicles(passenger and commercial), minivans, and associated accessories and parts. Part 1 Transaction Exposures1.1Mercedes Benz 1.1.1IntroductionTransaction exposure measures losses and gains arising from unanticipated alterations inupcoming cash-flows contracted in a currency-dominated transaction. Uncertainties emergefrom the exchange rate alterations’ effects on financial (consolidated) report. It approaches riskof foreign exchange in short-run and hence easy to recognize alongside measure. This permitsan increased effectiveness and efficiency in strategies for hedging to stay anticipated. 1.1.2: Mercedes Benz has a transaction exposure arising from its contract with Eagle Ottawa tosupply leather seat interior because the Mercedes Benz is located in Germany and EagleOttawa is located in the United States. In this case, Mercedes Benz is the foreign exchangepayer. Therefore, Mercedes Benz is exposed to a transaction cost risk from the movements in
Mercedes Benz & Toyota Motor Corp. 3dollar rates relative to Euro. Consequently, where the dollar depreciates, Mercedes Benz hasto make a smaller payment in Euro terms, but it would pay a larger amount in Euro if the dollarappreciates (Chan, Gan and McGraw 2015). 1.1.3: Mercedes Benz is also involved in a transaction exposure arising from its contract withInteva Products to supply sunroofs. Since Mercedes Benz is situated in Germany and IntevaProducts is situated in the United States, this leads to a transaction exposure between the twocountries’ exchange rates. This, therefore, means that Mercedes Benz is the payer of theforeign exchange. Hence, Mercedes Benz is exposed to transaction cost risk from the dollarsrates movement comparative to Euro. Mercedes Benz will hence pay less in terms of Euro ifthe dollar depreciates to purchase the sunroofs from Inteva Products. However, it will paymore in terms of Euro if the dollars appreciates. 1.1.4: Mercedes Benz has a transaction exposure emerging from its contract with Nemak tosupply cylinder heads. This is because Mercedes Benz is situated in Germany and Nemak issituated in Mexico hence difference currencies, that is, Euro and Mexican peso respectively.Because this is a buy side transaction, Mercedes Benz remains the payer of the foreignexchange in order to acquire the cylinder heads. Thus, Mercedes Benz will pay more in termsof Euro when the Mexican peso appreciates. However, Mercedes Benz will pay less in terms ofEuro in case the Mexican peso depreciates to purchase the cylinder heads from Nemak. 1.2Toyota Motor Corp 1.2.1Introduction This part discusses the transaction exposure of Toyota Motor Corp. It measures alterations inunsettled financial obligations value spent by Toyota before an alteration in rates of exchange
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