2 Do you think the financial risk associated with Thailand is higher or lower for a manufacturer of leisure products such as Blades as opposed to, say, a food producer? That is, conduct a microassessment of financial risk for Blades plc. Do you think a leisure product manufacturer such as Blades will be more affected by political or financial risk factors?

Recently, Ben Holt, Blades’ chief financial officer (CFO), has assessed whether it would be more beneficial for Blades to establish a subsidiary in Thailand to manufacture roller blades or to acquire an existing manufacturer, Skates’n’Stuff, which has offered to sell the business to Blades for 1 billion Thai baht. In Holt’s view, establishing a subsidiary in Thailand yields a higher net present value (NPV) than acquiring the existing business. Furthermore, the Thai manufacturer has rejected an offer by Blades plc for 900 million baht. A purchase price of 900 million baht for Skates’n’Stuff would make the acquisition as attractive as the establishment of a subsidiary in Thailand in terms of NPV. Skates’n’Stuff has indicated that it is not willing to accept less than 950 million baht.