Determining the future profitability of gdf operations

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Reference no: EM131418920

International Corporate Finance Case Study Assignment

Gaz de France("GDF") Case Study

1. Examine GDF's growth and development between the early 1950s and mid-1980s.

  • What determined its borrowing decisions during this period?
  • How and why did its liability management practices evolve?

2. As of 1986, what are the primary economic and non-economic variables determining the future profitability of GDF's operations?

  • How risky are these operations?
  • How well do GDF's capital structure and liabilty management practices complement these operations?

3. Referring to the example provided in the case's appendix on page 18, diagram the unwinding of the five year fixed-rate currency swap after one year to show how GDF has an unrealized gain of FF553.1 million.  

Be sure to decompose the swap value changes by separately quantifying the following:

  • the exchange rate effect
  • the interest rate effect
  • the combined effect (do not solve as a plug number)

4. Identify both the range forward and the exotic option in the case and comment on whether or not these derivative-style instruments were appropriately used.

5. As a director of GDF, what aspects of M. Reboul's swap management would you be inclined to approve or disapprove?

  • Evaluate his team's efforts to control risk.
  • What should he do now about the FF750 million of unrealized gains?

Attachment:- Case Study.rar

Verified Expert

The assignment was about GDF company which is the main producer, distributor of natural gas in France. The material tells us about the growth of natural gas industry across all the countries and how in France the growth happened. GDF is then main company responsible for natural gas in France. The material tells us about the success story of GDF using the liability management program. This program involved currency swaps and forward contracts to hedge against the currency movements in France. Since the domestic Franc market was inadequate, GDF had to resort to international buying. Hence its was exposed to currency risk. The successful implement of liability management program was discussed.

Reference no: EM131418920

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len1418920

3/8/2017 2:42:52 AM

Just answer Question no 2. Answer in 2 pages. No references. Must use your own words. As of 1986, what are the primary economic and non-economic variables determining the future profitability of GDF's operations? How risky are these operations? How well do GDF's capital structure and liabilty management practices complement these operations?

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