FINA410 INTERNATIONAL FINANCIAL MANAGEMENT-Group Project

INTERNATIONAL
FINANCIAL MANAGEMENT (FINA410-1405)
Group
Project
The firm manufactures
a global positioning system (GPS) that sells for $2,000, with cost of goods
sold (hardware 30% and software 70%) of 55% of sales. Compared to the United
States, China offers a 7% cost reduction in electronics manufacturing hardware
and a 45% reduction in software programming. India offers a 32% reduction in
software programming costs. So far, you have been unable to determine whether
India has the facilities to undertake the hardware manufacturing. The firm has
to invest $300 million. As far as China is concerned, you can send hardware and
software manufacturing to China or India.
You have been asked to
lead a team to study and create a report for the executive team on both
countries as business opportunities. As a group, study both China and India to
make your calculations and recommendations as follows.
Group
Deliverable (8–10 slides with in-depth presenter notes, excluding title and
reference slides)
·
Risk is a significant
factor. Identify each of the risk factors for each country (political
stability, exposures of transaction, interest rate, operating, and
translation); currency exchange rates; currency controls; skilled labor;
facilities; infrastructure; each country’s track record in using foreign direct
investment (FDI); and any history of political corruption and roadblocks to
establishing a going concern business.
·
Explore the expected
GDP growth of each country and the forecast exchange rates to the U.S. dollar.
Based on the forecast exchange rate with the U.S. dollar in 1 and 2 years,
should the $300 million investments be paid for immediately, hedged, or paid
50% ($150 million) in 1 year and 50% in 2 years?
·
What is the projected
savings for the firm?
·
What is the new cost
of goods sold percent of sales for each of the countries?
·
What are your
recommendations on choice of country?
·
How can your firm
arrange the business to be most profitable?
·
Assume the following:
o
Using the current spot
rate for the yuan exchange rate, the 12 -month forward rate is showing a 1.5%
weaker U.S. dollar, and the 24-month forward rate of exchange is showing a 2.4%
weaker U.S. dollar.
o
Using the current spot
rate for the rupee exchange rate, the 12 -month forward rate is showing a 1.0%
weaker U.S. dollar and the 24-month forward rate of exchange is showing a 2.0%
weaker U.S. dollar.
·
Include in-text
citations as well as a list of references using APA style.