Primetime Systems, Inc. now has total worldwide revenues of over $820 million forecast for this coming year.
Question:
Primetime Systems, Inc. now has total worldwide revenues of over $820 million forecast for this coming year. You have operations in the United States of $450 million with a 12% ROS (return on sales), operations in Germany of €200 million with a return on sales (ROS) of 11%, and operations in Shanghai, China, of 990 million Yuan with an ROS of 9%. You expect to repatriate all the ROS to the U.S. when available in 12 months. Determine the spot and 12-month forward exchange rates and determine any change in the ROS repatriated in 12 months based on exchange rates versus the current forecast. Describe the repatriation using a spot transaction, an outright forward, and a foreign-exchange swamp. Would there be any use or benefit in using a currency option or currency swaption? Describe each. How would you advise the company to handle the repatriation?
Step by Step Answer:
Financial Reporting Financial Statement Analysis And Valuation A Strategic Perspective
ISBN: 1711
9th Edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw