Question
Mentari Inc. is a conglomerate company that has four subsidiaries located in Brunei, Malaysia, United Kingdom, and Switzerland. The exchange rates available for the company
Mentari Inc. is a conglomerate company that has four subsidiaries located in Brunei, Malaysia, United Kingdom, and Switzerland. The exchange rates available for the company are MYR2.9000/BND, GBP0.4000/BND and BND1.2500/CHF. The following is the inter- subsidiary payments matrix for Mentari Inc in multiple currencies.
| RECEIVING | PAYING SUBSIDIARY (in millions) | |||
| SUBSIDIARY (in millions) |
Brunei |
Malaysia |
United Kingdom |
Switzerland |
| Brunei |
| MYR58 | GBP10 | CHF12.5 |
| Malaysia | BND10 |
| GBP12 | CHF16.25 |
| United Kingdom | BND 20 | MYR29 |
| CHF 20 |
| Switzerland | BND15 | MYR43.5 | GBP6 |
|
- Convert all the cash flows into Brunei Dollar (BND) and fill in the table cells below to show the intersubsidiary payments matrix for Mentari Group. If the transaction cost is 2%, how much the company needs to pay (in BND) if they decided not to do any netting?
| RECEIVING SUBSIDIARY (BND in millions) | PAYING SUBSIDIARY (BND in millions) | |||
|
Brunei |
Malaysia |
United Kingdom |
Switzerland | |
| Brunei |
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| Malaysia | 10 |
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| United Kingdom | 20 |
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| Switzerland | 15 |
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Transaction cost in BND with no netting:
- Perform multilateral netting by filling up the table below. If the transaction cost is 2%, how much the company needs to pay (in BND) if they decided to do multilateral netting?
| RECEIVING | PAYING SUBSIDIARY (BND in millions) |
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| SUBSIDIARY (BND in millions) |
Brunei |
Malaysia |
United Kingdom |
Switzerland |
Total receipt | Total Receipt/ (payment) |
| Brunei |
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| Malaysia |
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| United Kingdom |
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| Switzerland |
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| Brunei |
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Transaction cost in BND with multilateral netting:
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