Econ assignment
The Returns on Foreign Direct Investments when Exports are uncertain
1. The Bombay Bamboo Company is considering an expansion into 1-2 additional geographic regions. It grows bamboo forests in countries around the world to use for its bamboo furniture manufacturing business.
2. The Bombay Bamboo Company finances its investments in foreign countries using sales from the countries in the region. It has found that international sales are closely tied to U.S. export growth in the regions.
3. Formulas for sales revenue for the European Union (EU) and South America (SA) regions have been estimated and are provided to you for use in your analysis. Sales formulas are expressed in millions of dollars of sales revenue based on given U.S. export growth rates.
4. You are being asked to determine the returns (sales minus costs) for foreign direct investments in the EU and SA. Based on your results you will recommend which country (if any) to invest in.
6. Three alternative views of the each region are being tracked. The views are labeled View 1, View 2 and View 3. Four years of export growth data for the U.S. in SA and in the EU have been estimated and provided to you for your analysis.
7. The cost of building the bamboo forests and maintaining them over a four year period are also provided.
8. Finally the likelihoods that each of the views will occur in each region are provided so you can account for uncertainty and estimate expected returns.
9. Follow the instructions for the assignment as posted in Sakai and prepare the required analysis and report. Be sure to identify what distinguishing features your team has put into the project.