1. What are the motives behind Foreign Direct Investments (FDIs) to invest internationally? Explain.

2. ABC Corporation must decide to invest either in Germany or in China. The existing operation (100% in the U.S.) can generate 15% in return and 20% Standard Deviation. If investing in Germany for 30% of its operation (70% in the U.S.), the return in Germany facility is 20% with 30% Standard Deviation. If investing in China for 30% of its operation (70% in the U.S.), the return in China facility is 20% with 35% Standard Deviation. The correlation between U.S. and Germany, U.S. and China are 0.2 and 0.05, respectively.

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1. What are the motives behind Foreign Direct Investments (FD/s) to invest internationally? Explain. 2. ABC Corporation must decide to invest elther in Germany or in China. The existing operation ( 100% in the U.S.) can generate 15% in return and 20% Standard Deviation. If investing in Germany for 30% of its operation ( 70% in the U.S.), the return in Germany facility is 20% with 30% Standard Deviation. If investing in China for 30% of its operation ( 70% in the U.S.), the return in China facility is 20% with 35% Standard Deviation. The correlation between U.S. and Germany, U.S. and China are 0.2 and 0.05, respectively. a. Calculate the return for ABC Corporation if investing in Germany. b. Calculate the return for ABC Corporation if investing in China. c. Calculate the Standard Deviation for ABC Corporation if investing in Germany. d. Calculate the Standard Deviation for ABC Corporation if investing in China. e. Explain why the result in part c and d is different. Use the followina information to answer question 37. 3. Calculate the NPV of this investment. Should the corporation invest in this project? 4. If the exchange rate changes over the time; Year 1:$0.70, Year 2:$0.73, Year 3:$0.75, Year 4 : $0.77, calculate the NPV of the investment. Should the corporation invest in this project? 5. If the exchange rate changes over the time; Year 1:$0.82, Year 2:$0.80, Year 3:$0.78, Year 4 : $0.75, calculate the NPV of the investment. Should the corporation invest in this project? 6. If the corporation decides to hedge its cash flow (remitted cash flow after withholding) of 5,000,000 per year. The forward rate is $0.75. The spot rate for each year is $0.78. What is the NPV for the corporation? 7. Based on question 6 , if the spot rate changes over the time to: Year 1: $0.79, Year 2: $0.77. Year 3:$0.80, and Year 4: \$0.70, what is the NPV for the corporation