Question 1: Alfa Finance LLC is based in the U.S. with two subsidiaries, one located in the UK, and other in Norway. The US dollar has been depreciating against the Euro. The British pound has been appreciating against the U.S. dollar. The US parent company exports their main merchandise, luxury trams, in USD. The British subsidiary exports both in USD and in Euro. The Norwegian subsidiary exports predominantly in Euro. The parent company is now contemplating the possibility to open another subsidiary in Canada. Information about the British subsidiary operations are provided as follows: 5.000.000 British Sundary information Sales volume Sales priepu Direct Depreciation Selling and ministreres Current Act 2009 Current Liabilities (2020) Long term loans (2000) 63 0.000 1.100.000 1.200,00 SOLO 1,100 Working capital is expected to say them for the you Taxi 294 The foreign exchange rate changed from $1.3/ to $1.45/ in early 2020 and is expected to stay the same for the next few years. The weighted average cost of capital is 15%. You can assume the analysis is conducted over 3 years. Assume there is no change in working capital over the next 5 years Why would Alta Finance Lic comsider opening a subsidiary overseas in Canada? Explain your answer with a brief example for each factor you find important. 12.5 marks! (b) Provide an analysis of the potential effect of the change in exchange rate for the US parent company, for the British subsidiary and for the Norwedian subsidiary. You can assume the abwe rates must 35C Sunny ere to search contemplating the possibility to open another subsidiary in Canada. Information about the British subsidiary operations are provided as follows: 5,000,000 British Subsidiary information: Sales volume Sales price (pu) Direct cost (pu) Depreciation Selling and administration expenses Current Assets (2020) Current Liabilities (2020) Long term loans (2020) 6.5 800,000 1.300.000 1,200.000 800,000 1.100,000 Working capital is expected to stay the same for the next 5 years. Tax rate 25% The foreign exchange rate changed from $1.3/ to $1.45/ in early 2020 an average cost of capital is 15%. You can assume the analysis is conducted ov next 5 years.. Sepp Drop Segons CA3020 Current Lab 20 Long term 2020 SOKO 14 65 10,000 L.100,000 1.200,000 000 1.100,000 Wwwking pilised to say the new years 254 The foreign exchange rate changed from $1.3/E to $1.45/ in early 2020 and is expected to stay the same for the next few years. The weighted average cost of capital is 15%. You can assume the analysis is conducted over 3 years. Assume there is no change in working capital over the next 5 years (a) Why would Alfa Finance LLC consider opening a subsidiary overseas in Canada? Explain your answer with a brief example for each factor you find important. (2.5 marks] (b) Provide an analysis of the potential effect of the change in exchange rate for the U.S. parent company, for the British subsidiary and for the Norwegian subsidiary. You can assume the above rates [3 marks] (0) Evaluate the effect of the following scenarios on the potential net worth (5) of the British subsidiary based on the latest exchange rate No strategic change in the operations An increase in the selling price by 15% for each of the next 3 years An increase in the volume by 5%, accompanied by a decrease in price by 12% 15 marks (d) Why would you recommend a risk share agreement if you are a US firm and you are importing to Canada? Explain your answer. [2 marks) c 25C Sunny re to search O Question 1: Alfa Finance LLC is based in the U.S. with two subsidiaries, one located in the UK, and other in Norway. The US dollar has been depreciating against the Euro. The British pound has been appreciating against the U.S. dollar. The US parent company exports their main merchandise, luxury trams, in USD. The British subsidiary exports both in USD and in Euro. The Norwegian subsidiary exports predominantly in Euro. The parent company is now contemplating the possibility to open another subsidiary in Canada. Information about the British subsidiary operations are provided as follows: 5.000.000 British Sundary information Sales volume Sales priepu Direct Depreciation Selling and ministreres Current Act 2009 Current Liabilities (2020) Long term loans (2000) 63 0.000 1.100.000 1.200,00 SOLO 1,100 Working capital is expected to say them for the you Taxi 294 The foreign exchange rate changed from $1.3/ to $1.45/ in early 2020 and is expected to stay the same for the next few years. The weighted average cost of capital is 15%. You can assume the analysis is conducted over 3 years. Assume there is no change in working capital over the next 5 years Why would Alta Finance Lic comsider opening a subsidiary overseas in Canada? Explain your answer with a brief example for each factor you find important. 12.5 marks! (b) Provide an analysis of the potential effect of the change in exchange rate for the US parent company, for the British subsidiary and for the Norwedian subsidiary. You can assume the abwe rates must 35C Sunny ere to search contemplating the possibility to open another subsidiary in Canada. Information about the British subsidiary operations are provided as follows: 5,000,000 British Subsidiary information: Sales volume Sales price (pu) Direct cost (pu) Depreciation Selling and administration expenses Current Assets (2020) Current Liabilities (2020) Long term loans (2020) 6.5 800,000 1.300.000 1,200.000 800,000 1.100,000 Working capital is expected to stay the same for the next 5 years. Tax rate 25% The foreign exchange rate changed from $1.3/ to $1.45/ in early 2020 an average cost of capital is 15%. You can assume the analysis is conducted ov next 5 years.. Sepp Drop Segons CA3020 Current Lab 20 Long term 2020 SOKO 14 65 10,000 L.100,000 1.200,000 000 1.100,000 Wwwking pilised to say the new years 254 The foreign exchange rate changed from $1.3/E to $1.45/ in early 2020 and is expected to stay the same for the next few years. The weighted average cost of capital is 15%. You can assume the analysis is conducted over 3 years. Assume there is no change in working capital over the next 5 years (a) Why would Alfa Finance LLC consider opening a subsidiary overseas in Canada? Explain your answer with a brief example for each factor you find important. (2.5 marks] (b) Provide an analysis of the potential effect of the change in exchange rate for the U.S. parent company, for the British subsidiary and for the Norwegian subsidiary. You can assume the above rates [3 marks] (0) Evaluate the effect of the following scenarios on the potential net worth (5) of the British subsidiary based on the latest exchange rate No strategic change in the operations An increase in the selling price by 15% for each of the next 3 years An increase in the volume by 5%, accompanied by a decrease in price by 12% 15 marks (d) Why would you recommend a risk share agreement if you are a US firm and you are importing to Canada? Explain your answer. [2 marks) c 25C Sunny re to search O