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For each scenario below, provide a suggestion that can be taken by the company to solve the problem. Justify your suggestion with appropriate explanation.
For each scenario below, provide a suggestion that can be taken by the company to solve the problem. Justify your suggestion with appropriate explanation. Each question is worth 5 marks. (a) Axiata Group is one of the mobile companies with aggressive growth in telecommunication industry. Their assets are mostly tangible and relatively safe. Their management team comprised of experienced engineers and proven leaders. The business generates profits and allows subsidiary to retain its earnings for future expansion. They have subsidiaries in United Kingdom, Cambodia and Mauritius with stable stream of cash flows. Briefly explain whether Axiata Group should favour a debt-intensive capital structure or an equity-intensive capital structure. (b) Padini Corporation, a Malaysian based firm, has a China subsidiary that desires to issue a bond denominated in Chinese Renminbi because it could make payments with Renminbi inflows to be generated from existing operations. However, Padini Corporation is not well known to the investors who would consider buying Renminbi-denominated bonds. Meanwhile, Ping DuoDuo Corporation, a Chinese firm, desires to issue ringgit-denominated bonds because its cash inflows are mostly in Malaysian Ringgit. However, it is not well known to the investors who would purchase these bonds. Assume that Padini Corporation would like to expand its China subsidiary, while Ping DuoDuo Corporation desires to expand its Malaysian subsidiary. Suggest how both corporations can obtain financing for its invoice currency. (c) Darlie Corporation, a U.S. based multinational company, has a few subsidiaries located in Indonesia, Philippines, Brunei and Malaysia. During economic crisis, the subsidiary in Indonesia was restricted from remitting its Indonesia Rupiah earnings into U.S. dollars to be sent home. In addition, Indonesia government requires all funds to remain within the country in order to create jobs and reduce unemployment. Suggest TWO methods for the company to deal with this situation. (3 x 5 marks = 15 marks)
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