International Finance Report U.K. 2022

Running head: INTERNATIONAL FINANCE
INTERNATIONAL FINANCE
Name of Student
Name of University
Author’s Note

Running head: INTERNATIONAL FINANCE
EXECUTIVE SUMMARY:
This report states the investment plan for Hatfield Manufacturing System plc. To
analyses the project the net present value, internal rate of return and weighted average
cost of capital has been calculated. The report also discusses about the internal and
external factor of Turkey that might affects the business environment of the country. The
report also discusses about the foreign exchange rate of the company.

Running head: INTERNATIONAL FINANCE
Table of Contents
BACKGROUND OF THE COMPANY:...................................................................4
ADVANATGES AND DISADVANTAGES OF PLANT IN TURKEY:.......................4
INVESTMENT PROPOSALS:................................................................................6
Internal Rate of Return:.......................................................................................6
Net Present Value:..............................................................................................7
Weighted Average Cost of Capital:.....................................................................9
IMPACT OF FOREIGN EXCHANGE:..................................................................10
Payment to Supplier:.........................................................................................10
Hedging:............................................................................................................10
CONCLUSION AND RECOMMENDATION:........................................................10
REFRENCING:.....................................................................................................12

Running head: INTERNATIONAL FINANCE
BACKGROUND OF THE COMPANY:
Hatfield Manufacturing systems plc is one of the manufacturing companies that
deal with 3D printer. The main headquarter of the company is in United Kingdom. The
company in recent period also deals with the products that are required in the
aerospace industries and motor vehicle industries. In recent period the company wants
to expand their business and go multinational. To so the company has selected Turkey
as the first company where they want to open a manufacturing firm. To open the
business the company needs a well-developed financial plan. The company needs to
take care of the investment plan also (Bogataj and Bogataj 2019). The decision
regarding the investment in Turkey the company needs to analyses the internal and
external factor of the country that affects the country’s business environment. The
company’s financial plan to establish the manufacturing plant in Turkey needs a detail
explanation. The analyses include net present value, internal rate of return and
weighted average cost of capital. It is expected that this analyses will assists the
management of the compant to gain the profit from the project.
ADVANATGES AND DISADVANTAGES OF PLANT IN TURKEY:
Turkey is one of the most suitable countries for opening a business. Turkey
provides several kinds of facilities that assist the foreign companies to do business
(Browne et al 2016). The policies of the country are termed as very lenient. The
country’s business policies for the multinational companies are very profitable in
comparison to the other countries around the world. The government also supports the
business to expand by providing better communication facilities, transportation facilities
and more importantly a better infrastructure. The country provides one of the best water

Running head: INTERNATIONAL FINANCE
and drainage system. It is very important factor for Hatfield Manufacturing Systems plc
as the company is aspiring to open a manufacturing firm in the country. The country’s
transportation and communication is also stated as one of the best among all Middle
East countries. The electric system of Turkey is also suitable for the industries to
survive. The manufacturing companies like Hatfield Manufacturing Systems plc,
electricity are one of the most important factors for the company. The company will also
enjoy transportation because the automotive sector of Turkey is much more developed
in comparison to other countries around the world. To add more advantage the country
also has one of the best aerospace industries in the world. These aerospace provides
advantage to the industries and companies working in the land of Turkey. The country’s
workforce is also considered one of the best because the workforce is comprised of
young generation (Duarte, Pelegrini and Guarnier 2015). The young generation also
brings new idea and new innovation. The companies who want to develop a new firm in
Turkey will benefitted largely from the young generation. The country has a high
percentage of non-agricultural rates. This indicates that most of the people are willing to
do work in industries or private firms and public firms. The country’s GDP growth rate is
also pretty high. This indicates that the country produces greater percentage of products
as the inflation rate in the country is under the marginal rate.
In spite of having considerable amount of advantages the country is facing
considerable amount foreign problems. The problems include fallout from the European
Nation (Fertig et al 2014). The country also doesn’t hold good relation with the United
States of America and hence this affects the country’s import and export. The fallout
from European Nation also affects the country’s business environment. In recent years

Running head: INTERNATIONAL FINANCE
Turkey has seen a considerable rise in the inflation rate. This inflation rate will affect the
business environment, as the profit margin of the company will be reduced by
considerable percentage. Thus, Hatfield Manufacturing Systems plc needs to consider
the inflation rate of the country as it might also affect the production cost of the
products.
INVESTMENT PROPOSALS:
Internal Rate of Return:
Internal rate of return is also known as economic rate of return or discounted
cash flow of return. Internal rate of return is the type of investment method, which
assists the management of the company to gain an idea about the investing in a project
or not. The internal rate of return follows the same process that is used in the net
present value method. Internal rate of return calculation requires to be set at zero. The
trial and error method are mostly used for the result of internal rate of return (Foo, Bloch
and Salim 2018).
The internal rate of return is one of the simplest forms of investment analysis for
the firm. If the value of internal rate of return exceeds the cost of capital then the project
is acceptable. In the calculation of internal rate of return the rate is not required. As the
company depends on the hurdle rate of return and trial and error method, so the
company always tend to take highest percentage of rate of return (Jeuland and
Whittington 2014).
In spite of the greater advantage the internal rate of return have serious
disadvantages. These disadvantages include the ignorance of economies of scale in the

Running head: INTERNATIONAL FINANCE
process of internal rate of return. The internal rate of return also assumes the
reinvestment rate. The company also not useful for the projects that is mutually
exclusive.
After analysing the internal rate of return of the project of establishing a
manufacturing firm in Turkey by Hatfield Manufacturing Systems plc, it can be
determined that the investment plan should be feasible. The internal rate of return of the
country is higher than present value of the cash flow (Kośmieja and Pasławski 2017).
This means that the investment in Turkey for establishing the manufacturing firm will be
fruitful in next ten years. It can be gauged that the company will generate revenue from
the market due to the established firm presents in the country.
It is believed that the country’s internal factors like high GDP growth rate and well
established policies for the development of the business environment will assists
Hatfield Manufacturing Systems plc to gain profit from the market. These internal factors
will assist the management of the company to overcome the disadvantageous factors
that are present in Turkey.
Net Present Value:
The net present value method is the method, which shows that the present value
of the currency is not equal to the value of currency in future. The net present value
method is the method which calculates the present value of future cash flow in excess
of the present value of the investment outlay (Qiu, Wang and Wang 2015).
There are several advantages of net present value method. Among many
advantage of net present value method the main advantage which is the obvious is that

Running head: INTERNATIONAL FINANCE
the value of any monetary currency is not similar in future. The value of the monetary
currency is always high in comparison to the value of the currency in future. The value
of the monetary currency in future is discounted by capital cost. Another advantage that
can be identified is that the net present value method of the company assists the
management of the company to determine whether it will be feasible to invest in a
project or not (Vermeulen et al 2016). The net present value method enable the
management of the company to estimate and forecast the cash flow of the company for
10 years in future. The net present value method of the company also considers the
cost of capital of the desired project and risks that are associated with the project.
Net present value also holds considerable amount of disadvantage that affects
the company’s decision making over any project. The main disadvantage that can be
analysed is that the method requires guesswork. The guesswork includes the
assumption of the cost of capital. If the cost of capital is assumed is too low then the
firm’s investment will be suboptimal. On the other hand, the cost of capital is considered
to be too good then the investment will automatically considered as the good
investments. The net present value method is not competent enough to be useful when
the company needs to compare two projects. The size of the input greatly affects the
result of the net present value method of the company. If such input of the company
vanishes then the company faces serious problems regarding the company’s input.
To analyses whether Hatfield Manufacturing Systems plc needs to invest in the
establishment of the manufacturing firm in Turkey, the management of the company
uses the net present value method. The net present value method of the company
stands at 9%. As per the result it can be determined that the company can invest in the

Running head: INTERNATIONAL FINANCE
establishment of the project in Turkey. It is also estimated that the company will
generate considerable amount of profit from the market if the establishment is made in
Turkey. The reason behind such result is due to the transportation facilities and
electrical facilities of the country. The policies regarding the business and the foreign
policies improve the chances of the success of the business. It is further proved that the
decisions is right when the management of the company adopted the capital budgeting
and investment planning of the company. These methods indicate that the management
of the company should invest in the creation of the manufacturing firm in Turkey.
Weighted Average Cost of Capital:
Weighted average cost of capital is calculated using the percentage of capital
that are being sourced respectively in market value of the company. The weighted
average cost of capital assists the company to analyses the company’s financial
position after observing the bonds, equity and long-term debt of the company.
Weighted average cost of capital considers the market value of shares, bonds
and debt of the company. The weighted average cost of capital changes when the beta
of the company changes and the return on equity of the company also changes.
As per the analysis the weighted average cost of capital of Hatfield
Manufacturing Systems plc stands at 11.48%. This means that Turkey holds
considerable amount of risk that may affect the investment strategy of Hatfield
Manufacturing Systems plc. The risk may include the increasing inflation rate of the
country. It is being observed that country’s inflation rate in recent years is on rising
stage. This indicates that the country’s financial position is in declining stage and hence

Running head: INTERNATIONAL FINANCE
will affect the investment plan of the company. The cost of the goods will increase by
considerable means and hence the company will be affected by considerable means.
The company’s cost of debt is also pretty high. Thus, the company needs to consider
the external factors of the country before investment.
IMPACT OF FOREIGN EXCHANGE:
The foreign exchange rate affects the business environment by considerable
amount. The foreign exchange rate of the country affects the credibility, transactional,
transitional and liquidity of the country (Wang 2014). The main impact of the foreign
exchange can be seen in the payments that are made to the supplier and hedging. The
impact of the foreign exchange rate is explained below:
Payment to Supplier:
The payment made to the supplier depends on the foreign exchange rate by
considerable percentage, especially when the supplier resides outside the country. The
correct timing enables the company to realize less cost.
Hedging:
The hedging is the process the company needs to use wisely to gain profit from
the market. The hedging process enables the company to do business in more ease
and realize no loss when the foreign exchange rate is involved.
CONCLUSION AND RECOMMENDATION:
As per the above discussion it can be concluded that the company can invest in
Turkey, but the management of the company should be aware of the external affairs of
the country, as it may affect the business in future. The company should also looks after

Running head: INTERNATIONAL FINANCE
the foreign exchange rate, as it may help the company to save considerable amount of
cost.

Running head: INTERNATIONAL FINANCE
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