an American MNC with a subsidiary in Thailand expects to receive the following cash flows:

How much is the subsidiary worth? Please show all steps and work. (10)

1. Global Connections, an American MNC with a subsidiary in Thailand expects to receive the following cash flows: 2 3 4 50 Million 40 Million 40 Million Years Cash flows (Thai Bahts) Exchange Rate (for $1) WACC (discount rate) 1 30 Million TB 40 20% TB 40 TB 50 TB 60 15% 10% 10% How much is the subsidiary worth? Please show all steps and work. (10) 2. A. Suppose Moonland and Starland are two island nations surviving on coconuts and fish. Based on the following chart, who has an absolute advantage in which product? (5) B. Who has a comparative advantage in which product? (5) C. Can each benefit from specialization and trade with each other? To get full credit show your calculations and reasoning. (5) Moonland Starland Coconuts Fish Coconuts Fish Output per day 2,000 6,000 1,000 2,000 3. Why might agency costs be larger for an MNC than for a purely domestic firm? (5) 4. List and explain the factors that might affect exchange rates. Use examples to illustrate your explanations. (5+5)