HomeworkLib
Question

5. A US MNC has two cash flows. The first is a net cash inflow in the yen and the other is a net cash outflow in the peso. As
business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

a) This is false. As the firm as 2 currencies positively correlated to US dollar, both will move on same direction (range may differ). Hence firm does not have a "Relatively high" level of transaction exposure. It does have a "some" level of exposure but not a high one

b) This is False. It depends on the extent the yen and peso are correlated to dollar and the amount of money we need to give/take. Company will definitely be impacted (can be positive or negative) when exchange rate changes/fluctuate. Both rates will move in same direction (this is true) but that movement will definitely impact the firm.

c) This is False. Both rates will move in opposite direction (this is false). Infact both rates will move in same direction and that movement will definitely impact the firm.

d) This is False. It depends on the extent the yen and peso are correlated to dollar and the amount of money we need to give/take.

Hence correct option is (E)

0 0
Add a comment
Know the answer?
Add Answer to:
5. A US MNC has two cash flows. The first is a net cash inflow in...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • 5. According to the textbook, which of the following statements is (are) correct? (x) From 1960...

    5. According to the textbook, which of the following statements is (are) correct? (x) From 1960 to about 1975 in the United States, net capital outflow was small and sometimes negative and sometimes positive. (y) Most of the change from 1991 to 2000 in U.S. net capital outflow as a percent of GDP was due to a decrease in U.S. investment (z) In the U.S. from 2000 to 2006, net capital outflow as a percent of GDP became a larger...

  • Euromarket investment and fund raising A U.S.-based multinational company has two subsidiaries, one in Mexico (local cu...

    Euromarket investment and fund raising A U.S.-based multinational company has two subsidiaries, one in Mexico (local currency, Mexican peso, MP) and one in Japan (local currency, yen, ). Forecasts of business operations indicate the following short-term financing position for each subsidiary (in equivalent U.S. dollars): Mexico: $82 million excess cash to be invested (lent) Japan: $63 million funds to be raised (borrowed) The management gathered the following data: Determine the effective interest rates for all three currencies in both the...

  • If the current account balance is negative and the capital account balance is zero, _________. a....

    If the current account balance is negative and the capital account balance is zero, _________. a. the financial account balance must be negative b. the financial account balance must be twice the current account balance c. there is net inflow of foreign investment d. there is net outflow of foreign investment e. capital inflows must be less than capital outflows Initially the exchange rate between the Australian dollar and yen is ¥80=A$1. Suppose that the exchange rate changes to ¥75...

  • Assume that you are a Financial Manager of Starbucks Coffee, Inc., a multi-national corporation. You are...

    Assume that you are a Financial Manager of Starbucks Coffee, Inc., a multi-national corporation. You are in charge of determining the impact of exchange rate changes on the firm. Changes in currency exchange affect both the balance sheet and the income statement. The balance sheet impact occurs when the value of international assets are translated to U.S. dollars. The values of those assets change as the exchange rate changes. The value of costs, revenue, and profit also are impacted on...

  • Can anyone answer the question and explain it thx alot 22. Jet engine manufacturing entails enormous...

    Can anyone answer the question and explain it thx alot 22. Jet engine manufacturing entails enormous economies of scale. Pratt & Whitney, a large U.S. jet engine producer, faces substantial competition from Rolls-Royce, the British engine manufacturer. What would be the BEST way for P&W to cope with a dollar that has recently appreciated by 50%? a) accelerate R&D spending and cost-cutting efforts b) shift some of its production abroad c) raise the foreign currency prices of its engines sold...

  • Which of the following criteria should be used to choose a project if there is a...

    Which of the following criteria should be used to choose a project if there is a conflict between two mutually exclusive projects? A. The project whose payback period is equal to the expected years required to recover the original investment should be chosen. B. The project whose internal rate of return is higher than its modified internal rate of return should be chosen. C. The project whose discounted payback period is longer than its traditional payback period should be chosen....

  • true-false questions my nova - Yahoo Search Results MCC Single Sign a l Statements: (1) The...

    true-false questions my nova - Yahoo Search Results MCC Single Sign a l Statements: (1) The purpose of economic analysis is to assess the overall outlook of the economy and the impact of economic changes on the firm. (2) The international environment includes all the uncontrollable forces originating outside the home country that surround and influence the firm. (3) International economic analyses should provide economic data on both actual and prospective markets. (4) A common basis for assessing economic development...

  • 1. John sold a call option on Euro for $.04 per unit. The strike price was...

    1. John sold a call option on Euro for $.04 per unit. The strike price was $1.30, and the spot rate at the time the option was exercised was $1.32. Assume John bought the Euro from the market if the option was exercised. Also assume that there are 100,000 units in a Euro option. What was John’s net profit on the call option? Baylor Bank believes the New Zealand dollar will appreciate over the next 20 days from $.50 to...

  • The net export function illustrates that:A) net exports are a positive function of domestic income....

    The net export function illustrates that:A) net exports are a positive function of domestic income.B) net exports are independent of domestic income.C) net exports are a negative function of domestic income.D) imports are independent of domestic income.E) exports are independent of foreign income. Suppose the marginal propensity to import for country A is 0.4. Calculate the change in total value of imports of the country if national income increases by $100,000.A) $16,000B) $20,000C) $60,000D) $40,000E) $25,000 An MPI of 0.4 indicates that...

  • 2006, interest rates increased from 5% to 7%, when this happens consumers are A. less likely...

    2006, interest rates increased from 5% to 7%, when this happens consumers are A. less likely to save, that is, sell a financial asset. B. more likely to save, that is, sell a financial asset. C. less likely to save, that is, purchase a financial asset. D. more likely to save, that is, purchase a financial asset. I. In 2. If commercial banks hold all their assets in the form of required reserves: A. only they will be able to...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT