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Example problems Ch 1

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Example Problem (Chapter 1)
Dollar value of MNC’s cash flows
Example Problem (Chapter 1)
Dollar value of MNC’s cash flows - 1
Assume that Live Co. has expected cash flows of $200,000 from domestic
operations, 200,000 Swiss francs from Swiss operations, and 150,000 euros
from Italian operations at the end of the year. The Swiss franc's value and
euro's value are expected to be $1.05 and $1.20 respectively, at the end of
this year. What are the expected dollar cash flows of Live Co?
$200,000 + SFr200,000 × $1.05/SFr + €150,000 × $1.20/€ = $590,000
Example Problem (Chapter 1)
Dollar value of MNC’s cash flows - 2
Assume that Live Co. has expected cash flows of $200,000 from domestic
operations, cash inflows of 300,000 Swiss francs due to exports to Swiss
operations, and cash outflows of 100,000 Swiss francs at the end of the
year. The Swiss franc's value is expected to be $.83 at the end this year.
What are the expected dollar cash flows of Live Co?
$200,000 + (SFr300,000 – SFr100,000) × $0.83/SFr = $366,000
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