Multinational Corporations (MNC) are defined as firms that engage in some form of international business. Their managers conduct international financial management which involves international

Running your MNC (Multinational COMPANY)

6 to 8 pages (1,5 space – Calibri 12)

SUPPORT the answers always with EXAMPLES

Please don’t start answering complete questions and finish (because is done the number of page) with poor answer

Please read the announcement to complete the answer

Addressed all content mentioned in the questions

Use the attached book (attached) for references: The Economics of Money, Banking and Financial Markets, Seventh Canadian Edition

Reports

Multinational Corporations (MNC) are defined as firms that engage in some form of international business. Their managers conduct international financial management which involves international investing and financing decisions that are intended to maximize the value of the MNC. The goal of these managers is to maximize their firm’s value. The MNC objectives are to identify new markets to increase market share, invest excess cash, and ensure the soundness of any host country's financial market. As the CFO you are asked to analyze the strengths and risk of a potential new market and prepare a report to present to the Board.

As an MNC you encounter Foreign Exchange Risk -Hedging

(a) Discuss the different options for hedge receivables and payables and recommend to your Board the best hedging strategy for the MNC. Be sure to qualify your recommendations and use examples.

(b) As an MNC when you would use the spot rate, discuss and use examples

(c) If the MNC currency's in Mexico is weaker, how will it impact your investment (from question 2 BELLOW) and profits?

(d) Go to www.oanda.com Click on “Currency Tools”, then “Historical Currency Converters”, and  “Currency Trends”. Explain how the home currency (Canada) has changed (compare with the host currency (Mexico) over the last three months and how will it impact the MNC’s business.

(e) Your company will need to repatriate revenue back home, which hedging strategy will you use and why?

 United States Presidential candidate Hillary Clinton ran on the policy, “no bank is too big to fail”

(a) Explain the too-big-to-fail policy and how the policy is associated with asymmetric information problems?

(b) CDIC is in place to protect clients in the event of a failing bank.

a. Discuss its two-payout method

b. Financial experts have criticized the CDIC; discuss two of the primary arguments against the CDIC

c. What are two primary arguments for CDIC

d. Over the years CDIC has changed the ways it calculates its premium; explain the evolution over the past years. (the evolution of how premiums are calculated).

FROM QUESTION 2:

Question 2: MNC Financing. The MNC will need financing to purchase the product or raw material new supplier.

Discuss the amount of financing needed.

The product Rossy plans to market must be identified before he begins to discuss how much money he needs. First off, Rossy is a $28 million corporation that is currently in operation. In order to create 500,000 retail locations in Canada after opting to launch a new product in the Mexican market, the company will require at least $3.5 million in finance (Berezkina, 2022) Rossy will require $2 million if the supplier sells retail goods at his $2.0 per item and takes other manufacturing costs, such as labor and factory setup, into account. There are other expenses, transportation, and promotions. Therefore, a budget of at least $3.5 million is appropriate.

Explain how you arrived at the amount and how it will be spent.

Approximately $1.5 million of that budget will be used for production costs. The business must then invest approximately $1 million in creating a product that is helpful, appealing, and marketable. Once True Earth had established a presence in the market and a sizable client base, additional product promotion would help it gain market share, leaving around half of the competition behind.

Explain the different options available for financing.

To get financing there are different options available –

· Bonds- In exchange for regular interest payments, investor loans money to a business or the government in the form of a bond for a set length of time. When the bond matures, the bond's issuer pays the investor their money back (Chaudhry et al., 2021).

· Stock- A stock is a specific kind of instrument that certifies ownership of the issuing corporation by the bearer. Corporations issue (sell) stock to raise money so they can fund their operations. Common and preferred stocks are split into several categories.

· Bank Loan- One of the most popular ways to acquire money for a business is through a business loan. A loan is a more advantageous source of funding for a successful company than share capital since it permits greater leverage. Financial resources were necessary for a business's expansion.

From your discussions from “c” choose the best option for your corporation and explain its advantages for the corporation

Rossy is still growing and right now needs additional management oversight. The company would have had the chance to involve more stakeholders by pursuing equity financing, but since Rossy is all about its narrowly focused product segments and providing exceptional experiences for the particular target audience, involving more stakeholders could alter how the company interacts with that audience. In light of the foregoing, depending on the exchange rates and current interest rates, it is preferable for Rossy to borrow money from overseas markets. Doing so has numerous advantages for the company.

Will you seek financing in the domestic or foreign country, why, how, and where? Include the impact of interest rates and foreign exchange rate in your answer.

Rossy invest in Mexican markets, as was already discussed in this article. Rossy is offering high-end hair care products, something the Mexican business has very little experience with. Offering shares in the company can help the company get the most money out of this agreement (Hasibuan et al., 2021). The daily care business in Mexico is dominated by a number of enormous companies, with Rider shops being the main player in terms of retail goods.

The business has decided to borrow money from Mexican markets. As of June 8th, 2022, the benchmark interest rate for borrowing money from central banks is fixed at 4.90%. Mexican banks set their average borrowing interest rate at 10.3%. As of June 26th 2022, the average prime interest rate for borrowing money from Mexican banks is 3.70%, which is undoubtedly lower than the interest rate Rossy would pay if he borrowed money from Mexican markets. However, because of the foreign exchange difference, Maxicon markets do offer the advantage of having access to more fun. On June 26th, 2022, one Canadian dollar will be worth 60.49 currents.

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