International Financial Management
14th Edition
ISBN: 9780357130698
Author: Madura
Publisher: Cengage
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As the executive of a manufacturing firm that receives supplies from 18 different countries and sells products to 24 countries, your success and failure is determined by exchange rates, which cause frequent fluctuations in the price of supplies and the sale price of manufactured goods. Considering both the pros and cons of currency hedging and strategic hedging, which strategy would you opt for? How would you justify this decision to other executives and to shareholders?
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Due to their rapid expansion to foreign markets the process is sometimes referred to as the “McDonaldization” of new markets. Which market entry strategy is McDonald’s Corporation using in those countries where local governments do not allow 100% foreign funded enterprises?
a.Franchising
b.Partnerships with local (domestic) companies
c.Mergers & acquisitions
d.Local holdings
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One of the ways to analyze a company’s financial performance is to compare its performance with those of
Multiple Choice
foreign governments.
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its competitors.
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A US firm does business in Australia. In attempting to assess its economic exposure, it compiled the following information:
Its U.S. sales are somewhat affected by the value of the Australian dollar (AU$), because it faces competition from Australian exporters. It forecasts the U.S. sales based on the following three exchange rate scenarios:
Revenue from U.S. Business
Exchange Rate of AU$ (in millions)
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Variable operating expenses are estimated at 20% of total sales (after including Australian sales, translated to a dollar amount)
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