International Financial Management
14th Edition
ISBN: 9780357130698
Author: Madura
Publisher: Cengage
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A company manufactures a product in the United States and sells it in England. The unit cost of manufacturing is $52. The current exchange rate (dollars per pound) is 1.213. The demand function, which indicates how many units the company can sell in England as a function of price (in pounds) is of the power type, with constant 27556733 and exponent -2.5. A) Develop a model for the company's profit (in dollars) as a function of the price it charges (in pounds). Then use a data table to find the profit-maximizing price to the nearest pound. Assume that the price ranges from £45 to £100 in increments of £1. Round your answer for the maximum profit to the nearest dollar and your answer for the best price to the nearest pound.
1. Maximum profit: $______ 2. Best price: £ ______
a) The Business and Financial Times currently has given the following quotes between ¢:$ as:Spot = 0.7200 – 0.72501 month forward = 0.0014 – 0.0016 premium1 month forward rate = 0.7186 – 0.7234
i. Your company currently has GH¢32,500 and wishes to import goods from America. Assuming you are the financial advisor of such company, what will be your advice?
ii. Should they import now or a month’s time, assuming prices will remain constant?
b) Agency problem is pervasive and exists in practically every organization whether a business, church, club, or government. Organizations try to solve it by instituting measures but no organization can remedy it completely.How would you analyze this statement within the context of a limited liability company and what are the possible remedies to this problem?
Last week, 13 Mexican pesos could purchase one U.S. dollar. This week, it takes 11 Mexican pesos to purchase one U.S. dollar. This change in the value of the dollar will ________ net exports from the United States to Mexico and ________ Mexico aggregate demand.
A) increase; increase
B) increase; decrease
C) decrease; decrease
D) decrease; increase
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- FOREIGN INVESTMENT ANALYSIS After all foreign and U.S. taxes, a U.S. corporation expects to receive 2 pounds of dividends per share from a British subsidiary this year. The exchange rate at the end of the year is expected to be 1.30 per pound, and the pound is expected to depreciate 5% against the dollar each year for an indefinite period. The dividend (in pounds) is expected to grow at 10% a year indefinitely. The parent U.S. corporation owns 10 million shares of the subsidiary. What is the present value in dollars of its equity ownership of the subsidiary? Assume a cost of equity capital of 11% for the subsidiary.arrow_forwardData for Question Assumptions Values Sales Volume per Year 900 US Dollar Price of Annual Subscription 240 Spot Exchange Rate (MWK$) 771.83 Expected Spot Rate (MWK/$) 1082.95 Unit Volume Decrease if Price in MWK Increased 45 % This is a US cloud meeting firm selling subscription video conferencing online to Malawian businesses. Using the data above, calculate under Same Malawian Kwacha (MWK); a)US dollar price of a single subscription. b)Unit volume of sales of subscription. c)US dollar sales revenue of all subscription revenues.arrow_forward
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