Students' zone - Learning Assignments

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Chapter 13 Global financial management

(1) What are the three types of risk that a global company is exposed to as a consequence of currency
fluctuations?
(2) On 14 January 2002 it was announced that the US carrier Jetblue would buy 10 Airbus 320 for US
$500 million. The planes were to be delivered over four years (two in 2002, two in 2003, three in
2004 and 2005). Airbus incurs 70 per cent of its cost in euros. What can Airbus Industries do to
cover its currency fluctuation risks?
(3) Why are most major British global companies in favour of joining the eurozone?
(4) What are the benefits and problems for a Japanese firm being listed on the New York Stock
Exchange?
(5) Why is the adjusted present value (APV) method preferred to the cost of capital adjustment (CCA)
method in valuing international projects?
(6) How can a company deal with strategic exposure?
(7) What is a letter of credit?
(8) Why are correlation coefficients between stock market returns so high (Table 13.1)?
(9) What type of global financial management tools would a global firm have used to counteract the
adverse impacts of the 1997 Asian Crisis?
(10) The central finance function is one of the central corporate functions of a conglomerate. Do you
foresee a trend towards the formation of a global swapping bank account? What are the pros and
cons of implementing such a financial tool?
(11) Can companies take advantage of favourable exchange or tax rates and make purchases in different
currencies/countries?
(12) Name six commodity products which have forward and futures trades. Can you think of a commodity
product not related to natural resources which has forwards and futures trades?
(13) When a global company originates from a country which may not have a sound financial system (e.g.
Korea), should its overseas offices/subsidiaries hedge their local currencies against the currency of
the head office or hedge it against a foreign currency (e.g. US$), which is less prone to attack from
international finance companies (IFCs)?
(14) Why do you think the Japanese stock market, in Table 13.1, was not correlated to other
markets?