PLEASE NOTE THAT ASSIGNMENT WILL BE TURNED IN THROUGH TURNITIN, THEREFORE IT CAN’T BE PLAGIARIZED!
Read Chapters 13 & 14
Answer the following questions using the “TURNITIN” link directly below these instructions. Late work is not accepted. Refer to the Class Schedule for due dates.
Chapter 13
Assume
that you wanted to expand your Learning English business to other
non-U.S. countries where some individuals may want to speak English.
a.
Explain why you might be able to stabilize the profits of your total
business in this manner. Review the motives for direct foreign
investment that are identified in this chapter. Which of these motives
are most important?
b. Why would a city such as Montreal be a less desirable site for your business than a city such as Mexico City?
c.
Describe the conditions in which your total business would experience
weak effects even if the business was spread across 3 or 4 countries.
d.
What factors affect the probability of these conditions occurring? (In
other words, explain why the conditions could occur in one set of
countries, but not another set of countries).
e. What data would you review to assess the probability of these conditions occurring?
f.
Consider that the prevailing service you offer is teaching individuals
in Mexico to speak English, and your business has already created some
supplemental pamphlets and CDs that translate common Spanish terms into
English. How could you expand your business in a manner that may allow
you to benefit from economies of scale (and perhaps even benefit from
your existing business reputation)? When you attempt to benefit from
economies of scale, do you forgo diversification benefits? Explain.
g.
How would you come to a decision on whether to pursue business
expansion that capitalizes on economies of scale even if it would forgo
diversification benefits? Do you think economies of scale would be more
important or less important than diversification for your business?
h. Is there any way to achieve economies of scale and yet still achieve diversification benefits?
Chapter 14
a.
Review the different items that are used in the multinational capital
budgeting example (Spartan Inc.). Describe the items that would be
included on a spreadsheet if you were to conduct a multinational capital
budgeting analysis of investing dollars to expand your existing
language business in a different location.
b. Assume that you
recognize your limitations in predicting the future exchange rate of the
invoice currency for your expanded business. You think that there are
several possible exchange rate scenarios, each with equal probability of
occurrence. Explain how you could use this information to estimate the
future NPV and make a decision about whether to accept or reject the
project.
c. Now assume that there is also much
uncertainty about the demand for your service by individuals. Explain
how you can attempt to incorporate this uncertainty along with the
uncertainty of exchange rate movements so that you can make a decision
about whether to accept or reject the project.
d.
Explain how you would derive a required rate of return for your capital
budgeting analysis. What type of information would you use to derive the
required rate of return?