Question
Please help with the following questions 1. Assume that General Electric (GE)s current assets are $401 billion, fixed assets are $797 billion, current liabilities are
Please help with the following questions
1. Assume that General Electric (GE)s current assets are $401 billion, fixed assets are $797 billion, current liabilities are $323 billion, and long-term liabilities are zero. Calculate GEs translation exposure using current/non-current, monetary/non-monetary, temporal, and current rate methods. (Hint: You wont be able to calculate using all the four methods based on given information. If you cant calculate using a method, state so and include the reason.)
2. Toyota has exposed assets of 7 billion and exposed liabilities of 5 billion. During the year, the yen appreciates from 110/$ to 80/$.
a. What is Toyota's net translation exposure at the beginning of the year in yen? In dollars?
b. What is Toyota's translation gain or loss from the change in the yen's value?
c. At the start of the next year, Toyota adds exposed assets of 1.5 billion and exposed liabilities of 2 billion. During the year, the yen depreciates from 80/$ to 115/$. What is Toyota's translation gain or loss for this year? What is its total translation gain or loss for the two years
d. What is Toyotas total translation gain or loss for the two years?
3. Suppose an agribusiness in Texas exports its crops. It expects an 18 million peso invoice for an export to Mexico to be paid in 90 days. The current spot and 90-day forward rates are $0.7502/Peso and $0.7422/Peso respectively.
a. Calculate the companys peso transaction exposure associated with this fee.
b. If the spot rate expected in 90 days is $0.7489, what is the expected U.S. dollar value of the invoice?
c. What is the hedged dollar value of the invoice?
4. A U.S.-based MNC imports 30 percent of its supplies from Europe. Exports to Europe, which are invoiced in euros, account for approximately 50 percent of its revenues. In 1-2 pages, explain how the MNC can reduce its economic exposure to exchange and interest rates fluctuations.
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