BRILLIANT ANSWER
hottboy561
MNCProjectPart4.docxPart four is a continuation of the project. Answer the following questions concerning your MNC identified in Part 1.
Assessing Exposure to Country Risk
1. Describe the financial factors that expose your business to country risk.
2. Describe the political factors that expose your business to country risk.
Capital Structure Decisions
1. Describe the capital structure that you would use to run your business.
2. Why might the proportion of equity to be used in your business be limited when the business is first created?
Long-Term Debt-Denomination Decision
1. If you planned to borrow long-term funds, you could borrow dollars or you could borrow the foreign currency of concern. Using the Internet or other sources of data, compare the U.S. interest rate to the foreign interest rate over the last 8 quarters. Which interest rate is typically higher?
2. Explain why you might be able to reduce your exposure to exchange rate risk by borrowing long-term funds denominated in the foreign currency of concern.
Ensuring Payment for Exports
1. Explain how your business could ensure payment for the products that you are exporting to a foreign country.
Financing in Foreign Currency
1. Given that your business has receivables in a foreign currency, you may want to consider financing in that same foreign currency to offset the exposure. Compare the recent interest rate of the foreign currency of concern to the U.S. interest rate: Is the foreign interest rate typically higher or lower than the U.S. interest rate? Would you use financing in that currency to offset receivables? Explain.
Managing Cash
1. Given that you receive periodic payments in foreign currency for your exports, explain how you could effectively use cash management. That is, explain how you would use the funds as they are received. If you had some existing short-term debt, would you prefer to invest the cash in short-term securities or would you pay off the debt?
