Wilmette Co. and Niles Co. (both from the United States) are assessing the acquisition of the same firm in Thailand and have obtained the future cash flow estimates (in Thailand’s currency, baht) from the firm. Wilmette would use its retained earnings from U.S. operations to acquire the subsidiary. Niles Co. would finance the acquisition mostly with a term loan (in baht) from Thai banks. Neither firm has any other business in Thailand. Which firm’s dollar cash flows would be affected more by future changes in the value of the baht (assuming that the Thai firm is acquired)?

FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698
FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698

Solutions

Chapter 14, Problem 5ST
Textbook Problem

Wilmette Co. and Niles Co. (both from the United States) are assessing the acquisition of the same firm in Thailand and have obtained the future cash flow estimates (in Thailand’s currency, baht) from the firm. Wilmette would use its retained earnings from U.S. operations to acquire the subsidiary. Niles Co. would finance the acquisition mostly with a term loan (in baht) from Thai banks. Neither firm has any other business in Thailand. Which firm’s dollar cash flows would be affected more by future changes in the value of the baht (assuming that the Thai firm is acquired)?

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